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Where Office Depot Stock Is Heading

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Stock remains southbound

As of May 3, Office Depot (ODP) stock had fallen 35.9% YTD (year-to-date). The company is scheduled to report its 1Q18 results on May 9. The stock price movement isn’t likely to change much as analyst projections have been subdued. Though sales are expected to increase 1.7%, its adjusted earnings per share are expected to fall 50% as a result of lower sales (due to store closures) and ongoing investments.

Since reporting its 4Q17 results on February 28, Office Depot has seen its stock fall 13.7%. In comparison, peers Best Buy (BBY), Target (TGT), and Costco (COST) had risen 9.6% 9%, and 3.7% YTD, respectively, as of May 3.

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Office Depot striving to survive

Office Depot is one of the last surviving office supply retailers. However, technological advancements have made most paper-based office supplies redundant, eroding suppliers’ top lines. The arrival of online retailers has worsened the situation. Whereas the company tried to merge with major office supplies retailer Staples, the merger didn’t comply with antitrust standards. Subsequently, Staples was taken private by Sycamore Partners.

To reverse its fortunes, Office Depot is now transitioning into a business service–focused company under its new CEO. The company has acquired CompuCom and launched an in-house service platform, BizBox. Office Depot is also concentrating on subscription-based services and divesting its non-strategic international operations. While these efforts are expected to boost its long-term growth, investments are expected to drag down its near-term profit and bottom line.

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