It usually takes a little bit of time to get over a breakup for both parties involved. At least one person in the relationship is more prepared to move on than the other, and that seems to be the case for Staples (SPLS) and Stressed Out holding Office Depot (ODP) after the Federal Trade Commission was successful in blocking their merger earlier this year.
While Staples has been more proactive in moving on post-breakup, Office Depot seems stuck in neutral, simply looking to cut costs with no announcements about how it plans to stem the tide of falling revenue. Year to date, Office Depot is down more than 42% while Staples has declined less than 20%, reaching a 2016 low under $7.50 this week.
On Wednesday, Staples announced it was partnering with GRM Information Management Services to launch a licensing program in an effort to expand its brand and footprint in the services industry. Under the new program, companies will be able to license the Staples trademark to launch Staples-branded products. Those products will include secure online storage, with GRM offering the services through the website Staplescloud.com.
While Staples' strategy seems to include a new emphasis on cloud storage and the digital future, Office Depot's only moves of note since the summer have been to announce it will not be opening its doors on Thanksgiving Day and several store closures.
Office Depot has closed 400 stores since 2014 with plans to close another 300 over the next three years as part of the $250 million cost-cutting plan it announced in August. Despite the closures, the company still has about 1,500 stores in North America. The company also sold its European business to the Aurelius Group in September as it looks to refocus its attention on North America.
Meanwhile, Staples is planning to close 50 stores this year as it looks to optimize its retail network. Half of Office Depot stores are within a mile of a Staples store, while about 70% of Office Depot stores were within 10 miles of a Staples store, company executives said during an earnings call earlier this year. Staples identified density as an industrywide problem that needs to be corrected going forward.
The office supply retail sector is clearly in trouble, a fact that necessitated the proposed merger between the two rivals in the first place. Growth Seeker holding Amazon (AMZN) was the elephant in the room during the two companies' courtship as the online retailer continues its legacy of disrupting a large swath of retail sectors.
Despite this disruption, the FTC felt a tie-up between the top two players in the office retail sector was a bad deal for consumers. There are legitimate questions for both Office Depot and Staples going forward. However, Staples is clearly in a better position to innovate right now than Office Depot. Office Depot isn't handling this breakup very well and the only way for it to reduce the stress level is to get back out there.