Office Depot (ODP) shares were up more than 6% Wednesday afternoon following the release of the office-supply retailer's latest earnings report. This was the first earnings release from the company since its proposed merger with Staples (SPLS) fell through in May.
"We are making good progress rebuilding our sales pipeline and moving our overall business forward, despite the disruption of the prolonged Staples acquisition attempt," said CEO Roland Smith. "In the near term, we remain focused on executing our Critical Priorities, completing the OfficeMax merger integration, implementing our new cost-saving programs, and returning capital to shareholders."
The company announced it would close 300 more stores over the next three years as part of an effort to cut annual costs by $250 million by the end of 2018. Office Depot also announced it would initiate a quarterly dividend of $0.025 per share, or $0.10 on an annualized basis, payable Sept. 15 to shareholders of record on Aug. 25.
About a month ago, Office Depot announced it had authorized a stock repurchase program of up to $100 million of its outstanding common stock. As of the end of last week, the company reported purchasing approximately 16 million shares at an aggregate cost of $55 million. The company also raised its stock buyback program to $250 million.
Office Depot forecast lower sales in 2016 than in 2015, due mostly to the store closures and the business disruption related to the attempted Staples acquisition "and continued challenging market conditions."
The company closed 42 stores in the second quarter as part of its previously announced closure plans. For the remainder of the year, the company expects to close 25 additional stores.
The Boca Raton, Fla.-based company lowered its adjusted operating income forecast for the year to between $450 million and $470 million from its previous $500 million expectations due to the Staples merger falling through.
Office Depot reported net income of $210 million, or $0.38 cents per share, compared to a loss of $58 million, or $0.11 per share, in the year-ago period. Wall Street was expecting the company to report net income of $70 million. Revenue for the period fell 6.5% to $3.22 billion, basically in line with analyst estimates.
"Longer term, our business review has also identified several attractive growth initiatives that we intend to aggressively pursue," Smith said.
Office Depot and Staples terminated their proposed $6.3 billion merger in May due to antitrust issues brought up by the Federal Trade Commission. As part of the companies' agreement, Staples paid Office Depot a $250 million breakup fee.
The office retail sector remains in flux thanks to what Office Depot and Staples said was increased competition from notorious retail disruptor and Growth Seeker holding Amazon (AMZN) . However, a federal judge sided with the FTC during the companies' antitrust trial, saying that while Amazon was taking business from smaller retailers, Office Depot and Staples still dominated contracts with most companies found in the Fortune 100.