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News > Companies
Office Depot closes stores
January 3, 2001: 2:08 p.m. ET

Office products retailer to shut 70 stores, take 4Q charge of up to $300M
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NEW YORK (CNNfn) - Office Depot Inc., warned Wednesday that it will close 70 stores and take a fourth-quarter charge of up to $300 million related to the move, citing sluggish sales that hurt last year's profits.

North America's No. 1 office products retailer, which has about 48,000 employees, did not disclose the number of workers to be affected by the closings, but did say it will cut 10 percent of its contract sales work force.

Officials at Office Depot did not immediately return calls requesting clarification.

The retailer also said that if current trends continue, its sales at stores open at least a year -- or same-store sales -- will fall about 5 percent in the fourth quarter, which is weaker than the company's forecasts from the middle of last year.

Office Depot said it expects to earn about 70 cents per share for 2000. Analysts surveyed by First Call expected earnings of 73 cents per share.

graphic"Our business review was thorough, candid and self-critical," CEO Bruce Nelson said. "In order to return our focus to our core business customers, foster a winning culture among our employees and restore credibility with the capital markets, we have had to make significant and sometimes difficult decision -- difficult primarily because they involve people."

The Delray Beach, Fla.-based company said it will close 67 underperforming stores in the United States and three in Canada, and will depart from the Boston, Phoenix, Cleveland and Columbus, Ohio, markets.

"We anticipate virtually all of theses stores will be completely liquidated and closed by they end of the first quarter," Nelson said in conference call.

As part of the restructuring, Office Depot plans to reduce the number of different products available, or "stock keeping units." This reduction will involve non-core items such as DVDs and children's software.

The company said it will record a pretax write-down of about $45 million on the value of its investment in a number of privately held Internet companies.

The company was confident about online sales, saying it expects $1 billion in e-commerce revenue in 2000 and about $2.5 billion by 2003.

Stock rises on news

The news heartened investors, with Office Depot (ODP: Research, Estimates) stock up 69 cents to $8 in early afternoon trading Wednesday.

But although many analysts applauded the changes instituted by Nelson, who has been CEO for only six months, some said they would reserve their judgment on the progress of the company until later in the year when the store closings take effect and particularly when a new president is brought on board.

"We are pleased to see Mr. Nelson make changes," said Aram Rubinson, retail analyst with UBS Warburg. "At this time, however, we can do nothing but reserve judgment until a new president is on board and accepting of the changes."

President David Fuente resigned from the company in October 1999. The following February, Shawn McGhee was named president of North American retail, only to be fired in August after the company decided to split his duties between two new divisions.

The company warned in early November that it expected same-store sales to drop significantly in the fourth quarter and earnings to fall far short of expectations due in part to weaker computer and accessory sales. First Call consensus expectations for fourth-quarter earnings were revised down to 12 cents per share from 17 cents as a result.

Staples (SPLS: Research, Estimates), Office Depot and OfficeMax Inc. all have warned of lower-than-expected profits or sales during the second half of 2000. OfficeMax (OMX: Research, Estimates) said in October it would close or relocate up to 50 underperforming stores.

-- from staff and wire reports graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.