Office Depot finances hurt by stalled Staples takeover

From staff and wire reports
Office Depot'as earnings fall short of expectations

Office Depot blamed disappointing first-quarter financial results on the delayed takeover by Staples.

The buyout by the rival office supply retailer, first announced more than a year ago, has been stalled as The Federal Trade Commission seeks to block the $6.3 billion deal. The FTC has said a combination of Staples and Office Depot would dampen competition and lead to higher office supply prices for businesses.

"The protracted regulatory review of the pending Staples acquisition continues to have a substantial disruptive impact on our business," said Roland Smith, chairman and CEO for Office Depot.

Office Depot, based in Boca Raton, said Tuesday that it expects a judge to make a decision about the deal by May 10.

The company reported net income of $46 million, or 8 cents per share, in the three months ending March 26, compared with $45 million, or 8 cents per share, in the same quarter the year before.

Earnings, adjusted for non-recurring costs, came to 10 cents per share, missing Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 13 cents per share.

The company posted revenue of $3.54 billion in the period, which also missed Street forecasts. Four analysts surveyed by Zacks expected $3.62 billion.

Office Depot Inc. shares fell 4.73 percent to $5.84 on Nasdaq. They have risen roughly 9 percent since the beginning of the year. The stock has dropped 34 percent in the last 12 months.

Office Depot said it expects sales this year to be lower than last year, primarily because of store closures and the continuing FTC case.

The company closed nine stories in the first quarter of 2016. It expects to close more than 50 stores this year, for a total of 400 beginning in 2014.

The stores closures are expected to save Office Depot at least $75 million annually, Smith has said.

Office Depot said it expects to spend about $100 million on merger expenses over 2016 and 2017.

Information from the Associated Press was used in this report.

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