While the major indices ended the last trading session in the negative territory, Office Depot, Inc. (ODP - Analyst Report) shares gained 2.2% after the company announced its decision to sell its European operation to The Aurelius Group. However, the financial terms of the deal have been kept under wraps. The news came almost four months after the attempt to merge with Staples, Inc. (SPLS - Analyst Report) fell through.
The company has been taking strategic initiatives to return to the growth track and focus on its core North American market. The sale of the company’s European operations is being looked upon as a part of these efforts.
The company is closing underperforming stores, reducing exposure to higher dollar-value inventory items, shuttering non-critical distribution facilities, concentrating on e-Commerce platforms as well as focusing on offering innovative products and services. By increasing its penetration into adjacent categories and enhancing its share of wallet with existing customers, Office Depot intends to boost sales in the contract channel. The company can also leverage its existing customer base by offering an expanded assortment of products.
With respect to cost containment efforts, Office Depot is employing a more efficient customer coverage model, focusing on lowering indirect procurement costs as well as general and administrative expenditures. It is also focusing on gaining from its U.S. retail store optimization plan. Management expects these endeavors to result in annual benefits of over $250 million by the end of 2018.
With the aim of boosting store productivity, this Zacks Rank #3 (Hold) company is focusing on optimal store site. Office Depot intends to concentrate more on improving sales per square foot through an increase in customer traffic and by converting them into potential buyers through targeted advertising, ongoing sales training and customer-oriented initiatives. The company provides assistance to customers with respect to PC maintenance, removal of viruses, and others.
Stocks to Consider
Stocks worth considering in the sector include Five Below, Inc. (FIVE - Snapshot Report) and ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Snapshot Report) .
Five Below currently has a Zacks Rank #2 (Buy) and long-term earnings growth rate of 29.5%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
ULTA Salon, Cosmetics & Fragrance surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings surprise of 7.7%. It carries a Zacks Rank #2.
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