Office Depot Inc. said it will close at least 400 U.S. stores to reduce overlap with OfficeMax, which it acquired last year, and better compete with e-retailers, mass market chains and drugstores.
Shares of Office Depot, which also reported better-than-expected quarterly results, rose as much as 20 percent in early trading. The stock was among the highest percentage gainers on the New York Stock Exchange on Tuesday.
The combined company operated about 2,200 stores as of December, employing 66,000 associates and bringing in about $17 billion in revenue. By the end of March the company said it had 1,900 U.S. stores. That's expected to drop to 1,500 by 2016.
Office Depot also reported Tuesday that it lost money in the most recent quarter, but reported higher sales and an improved profit forecast due to cost-cutting efforts, including the planned store closures.
The total store closures will save the company at least $75 million a year by the end of 2016 and will start adding to profit in 2015, it said.
Naperville-based OfficeMax merged with Office Depot in November, just days after securing regulatory approval for the blending of the nation’s second- and third-largest office supply retailers.
The combined company is headquartered in Boca Raton, Fla.
Office Depot's shares were up 15.8 percent at $4.83 in late morning trading.