Boca Raton-based Office Depot said Tuesday it would close 165 stores during 2014 — up from the 150 estimated earlier this year — but stuck with a total count of 400 store closures through 2016, the company said.
The office-supply retailer, which merged with OfficeMax last year in a $1.2 billion transaction, said it has completed its analysis of which stores will be closed across the U.S. and Canada. Locally, the retailer has closed two OfficeMax stores, in Coral Springs and Deerfield Beach.
The company also announced on a conference call following its second-quarter earnings announcement that it has settled a California lawsuit for $80 million, which it expects to pay in the fourth quarter.
Five years ago, former Office Depot business accountant David Sherwin sued the company, along with the State of California, claiming Office Depot overcharged state agencies for office supplies. Sherwin died March 16, but his estate continued to pursue the lawsuit.
The settlement is not an admission of wrongdoing, the company said. The allegations related to a contract in place from 2001 to 2011, when Office Depot was under previous management.
Chief Executive Roland Smith said Office Depot expects to realize more than $700 million in annual savings from the merger with OfficeMax by the end of 2016, up from the prior estimate of $675 million.
But meanwhile, the losses widened.
Office Depot lost $190 million, or 36 cents a share, for the quarter ended June 30, compared with a loss of $64 million, or 23 cents a share, for the same quarter in 2013.
Sales were $3.8 billion, compared with $2.4 billion during the second quarter of 2013, and 2 percent lower than sales of $3.9 billion when including OfficeMax's quarterly sales for 2013.
North American store sales were $1.5 billion, compared to $900 million, reflecting combined sales of Office Depot and OfficeMax in the quarter before the merger. Same-store sales — sales of stores open one year — declined 3 percent.
Slower sales were offset by lower expenses in payroll and advertising, No layoffs were disclosed. Office Depot employs about 1,600 at its Boca Raton headquarters.
Analyst Brad Thomas of KeyBanc Capital Markets asked on the conference call when Office Depot would begin reinvesting in the business and not simply be just focused on cutting costs.
Smith said Office Depot has identified two new target markets where purchasing "is driven by quality, service and experience" that could improve overall sales by $1 billion. He said Office Depot will be testing new business products and services in 20 geographic markets, but declined to identify the target consumers for competitive reasons.
Office Depot made other changes during the quarter including a "price match" to Amazon and a 90-day return policy.
"Obviously we have a lot of hard work ahead of us but I believe we're off to an excellent start," Smith said.
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