• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Staples

Stressed Out: Office Depot's Earnings Miss, but Investors Are Down With ODP

The office supply retailer's 4Q report doesn't matter nearly as much as its pending merger. 
By TONY OWUSU
Feb 24, 2016 | 03:37 PM EST
Stocks quotes in this article: SPLS, ODP

Despite yesterday's earnings miss, Office Depot's stress level remains unaffected as the company's pending merger remains on the front burner. 

Sales for the year were down 10% in 2015 after the company reported sales increases in 2013 and 2014. Profit margins for the year also fell to 24.2% from 27.6%.

For the fourth quarter, while the company did swing to a profit after reporting a net loss in the year-ago period, the $3.5 billion in revenue the company generated was short of the $3.6 billion Wall Street was expecting the company to report. Earnings of $0.07 per share also missed by $0.04.

Despite the company's miss, shares are off less than 1% on very weak volume as investors focus more on the company's pending merger with rival Staples (SPLS).

After rumors surfaced in late 2014 that Office Depot and Staples were considering a tie-up, Office Depot's stock went through the roof. The stock more than doubled from its 2014 low of $4.05, peaking at $9.59 just days after the two companies entered into a formal merger agreement.

Read more about the FTC's case against Office Depot and Staples. 

Office Depot has since settled in the $5 area, falling precipitously after FTC officials voted unanimously to file a suit to block the $6.3 billion merger.

Office Depot CEO Roland Smith blamed some of the lost revenue on the pending nature of the company's merger with Staples and called the FTC's anti-trust litigation on the matter an "ongoing business disruption."

"Primarily due to the impact of store closures, continuous challenging market conditions, and an ongoing business disruption from the extended regulatory approval process related to the pending acquisition by Staples. The company expects this disruption to continue through at least the first half of 2016, while the company completes the ongoing litigation."

That litigation doesn't look like it will end well for Office Depot as the FTC has not budged from its antithetical view of the company's proposed merger.

Office Depot has previously announced plans to shutter 400 stores by the end of the year while over 1,000 store closures are expected to follow if the deal is approved.

Earlier this month, Staples announced an agreement to sell more than $550 million in corporate contract business assets to office supplies wholesaler Essendant.

"We're pleased to reach this agreement with Essendant as we continue to work to complete the acquisition of Office Depot," said Staples CEO Ron Sargent at the time. "Our agreement with Essendant strengthens a national competitor, further enables independent office products dealers and helps minority and woman-owned businesses compete for national commercial customers." 

The moves haven't impressed FTC regulators, however.

"The proposed fix cannot salvage this merger," the FTC said in a brief made public late Friday.

All of these maneuvers will come to a head when the FTC makes its decision on the merger of the two companies in May. Until then, investors in the two companies continue to hold their breath.

For more on Real Money's 20 distressed companies to watch:

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: Sprint Is Collapsing Under the Weight of Its High-Yield Debt

Stressed Out: Office Depot/Staples Merger Sees Ray of Hope Following EU Approval

Stressed Out: Sprint Is Collapsing Under the Weight of Its High-Yield Debt

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from owning individual securities.

TAGS: Investing | U.S. Equity | Consumer Staples

More from Consumer Staples

My Top Stock Pick for 2021

Ed Ponsi
Dec 31, 2020 8:30 AM EST

Even after a solid 2020, this company has laid the groundwork for a successful 2021.

With Dividend Investing En Vogue, Here Are 4 More Stocks to Consider

Chris Versace
Dec 22, 2020 10:00 AM EST

The consistent annual dividend increases by this quartet even during bad times make them good income-investing bets going forward.

2 Food Stocks Worth Digging Into for Dividend-Hungry Investors

Chris Versace
Dec 3, 2020 11:00 AM EST

Long histories of annual dividend increases make Hormel Foods and McCormick & Co. attractive income plays.

Snack Maker Utz Brands Could Be a Stock to Dip Into Based on Its Charts

Bruce Kamich
Nov 24, 2020 8:42 AM EST

There is a limited price history with the company, which went public in August, but aggressive traders could probe its long side.

Pandemic Should Help This Cereal Maker Remain a Serial Dividend Payer

Chris Versace
Sep 27, 2020 8:15 AM EDT

Food company General Mills is benefiting as more consumers work from home and dine out less.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I'll discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login