Office Depot is on track to deliver $400 million to $600 million in savings from merging with rival OfficeMax, the Boca Raton-based company said Tuesday during an earnings conference call with analysts.
But the company wouldn't comment on expected savings from combining retail store operations that overlap, citing the ongoing review of the merger by the Federal Trade Commission. Shareholders approved the merger of the nation's No. 2 and No. 3 office-supply retailers on July 10; the FTC also must sign off on the deal.
Chief financial officer Mike Newman said after working on the merger with OfficeMax and Boston Consulting Group for four months, "we've had a chance to dig into these numbers. ... We've reaffirmed the range [of savings]."
Office Depot said its North American cost basis once merged with OfficeMax would be about $11 billion. In the cost of goods the stores sell, there's a potential of $130 million to $200 million in savings; $70 million to $100 million of savings in warehouses or distribution centers; $70 million to $100 million in advertising and marketing; and $130 million to $200 million in selling and administrative expenses.
Additional savings could be seen in international business and working capital, Newman said.
BB&T Capital Markets analyst Anthony Chukumba asked on the call whether the loss of Bruce Besanko, OfficeMax's CFO who recently left for the same job at supermarket operator SuperValu, was problematic in determining ultimate cost savings.
"Bruce's leaving was a surprise, but we've had a lot of people working on these teams," Newman said. The teams working to integrate the companies are comprised of 30-to-40 people from each retailer working full-time, he said.
Office Depot, which has 1,700 employees at its Boca Raton headquarters, didn't disclose any details about the selection of a new CEO or corporate office location either in Boca Raton or Naperville, Ill., where OfficeMax is based.
Office Depot CEO Neil Austrian said the company would go "on the road" to talk to shareholders who are scheduled to meet Aug. 21 to choose board members. In letters to shareholders, Office Depot has been trying to deflect efforts by major shareholder Starboard Value to elect its four nominees.
The company reported Tuesday that it lost $64 million on quarterly sales of $2.4 billion, down four percent from $2.5 billion the same period a year ago. The report generally met expectations, reflecting the company's restructuring and pre-merger costs.
"We feel very strongly we're on the right path and are eagerly pushing ahead to continue to improve results," Austrian said on the conference call.
Quarterly sales got a boost from the timing of the Easter holiday, but that was offset by closing some international operations. Sales in comparable stores — those open more than a year — fell 4 percent.
Office Depot did well in copy and print sales, and break-room supplies. But technology sales — especially laptops — remained sluggish, Austrian said.
The retailer ended the quarter with 1,109 stores in the U.S. and Puerto Rico after closing five stores and relocating one during the period.
The company's quarterly loss of 23 cents a share mirrored results of the April-June quarter in 2012. But before preferred stock dividends, the loss narrowed to $54.6 million compared to $57.4 million in the same quarter a year ago.
Office Depot reported $30 million in pre-tax charges related to the merger and $4 million related to store downsizing or closing.
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