Office Depot to Re-open 13 Stores - Analyst Blog
28 March 2012 - 12:45AM
Zacks
Tomorrow, Office Depot
Inc. (ODP), one of the leading suppliers of office
products and services across the globe, will reopen 13 remodeled
stores in Houston, Texas bringing in Tony Stewart, NASCAR champion,
as a celebrity guest. The company currently operates 46 stores in
Houston.
The remodeled stores are tailored
according to consumer preferences, which will help save shopping
time. On the left hand side of the store one can find Copy &
Print Depot and other technology products, whereas on the right
hand side supplies are displayed. The cash counter is positioned at
the front of the stores.
The company, in order to drive
sales, has undertaken initiatives including improvement in customer
in-store shopping experience, investment in Copy & Print Depot
and Tech Depot services, remodeling of stores and introduction of
smaller format stores, and margin improvements through
rationalization of stock keeping units and product pricing.
In view of this, the company rolled
out 8 locations of size 5,000 square feet. Moreover, continuing
with its margin improvement initiatives, the company remains
committed towards price optimization and effective promotions.
Office Depot kicked off a new service model in 300 stores before
year-end 2011, and plans to initiate the new model in additional
360 stores in the first quarter of 2012, with the expectation of
implementing in all the stores by this year-end.
We appreciate Office Depot’s
rational approach to slow the pace of stores openings in North
America, given the weak consumer environment. The company opened 6
stores in fiscal year 2009, significantly down from 59 stores
opened in 2008 and 71 stores opened in 2007. The company opened 17
stores in fiscal 2010 and 9 stores in fiscal 2011. Office Depot now
plans to increase the store count in a low single-digit number in
fiscal 2012.
We remain cautious about the
macroeconomic environment and sluggish job market. The recovery in
the economy still lacks luster. As a result, consumers and small
businesses remain watchful about their spending for big-ticket
items such as business machines and other durable products. We
observe that the demand for office products is closely tied to the
health of the economy.
No one can predict the future but
genuine efforts are being implemented to combat the tough economy.
Business budget remains tight, consumers remain cautious than ever
before and companies are trying hard to navigate through the
challenging maze. Going by the pulse of the economy and given the
pros and cons, we prefer to maintain our long-term “Neutral”
recommendation on the stock. Moreover, Office Depot, which competes
with OfficeMax Inc. (OMX) and Staples
Inc. (SPLS), holds a Zacks #3 Rank that translates into a
short-term “Hold” rating.
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
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