Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Aug 7, 2013, we upgraded leading office supplies company, Office Depot Inc. (ODP - Analyst Report), to Neutral based on its improved prospects.

Why the Upgrade?

Office Depot came up with in line bottom-line results for the second quarter of 2013, marking an improvement from the prior-year quarter. The company is containing costs, closing underperforming stores, concentrating on its e-Commerce platforms, and focusing on providing innovative products and services, which should all contribute to margin improvement.

In a move to uplift itself, Office Depot decided to merge its business with OfficeMax Incorporated ,which would help the company capture incremental market share, streamline its cost structure and better compete with the industry bellwether, Staples Inc. (SPLS - Analyst Report) and online rivals such as Amazon.com Inc. (AMZN - Analyst Report).

The merger will result in annual savings of $400 million to $600 million by the third year of the deal. The transaction is expected to be concluded by the end of 2013. The company stated that it expects to generate $130–$200 million savings from purchasing efficiencies, while supply-chain initiatives are projected to result in $70–$100 million cost savings.  Selling, general and administrative efficiencies are expected to result in $130–$200 million in savings, while it expects to generate cost synergies of $70–$100 million from advertising and marketing efficiencies.

Amid these positives, the company continues to disappoint on the sales front. Sales decreased 4% during the recently concluded quarter on account of sluggish demand for big-ticket items. In the near future, we expect demand for office products to remain soft.

Currently, Office Depot holds a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%