Office Depot To Shut 126 Stores

By Alan Wolf -- TWICE, December 15, 2008

Office Depot will close 126 stores and six of its 33 distribution centers this year and next as part of a "strategic review" of its operations.

In addition, planned new store openings for 2009 will be cut by half to about 20 locations.

The measures are expected to boost earnings before interest and taxes (EBIT) by $90 million next year and cash flow by $70 million, the office-supply chain said.

The company will close 112 underperforming stores throughout North America over the next three months and 14 more through 2009 as their leases expire or other lease arrangements are finalized.

The first wave of store closings will include 45 in the Central United States, 40 in the Northwest and Canada, 19 in the West and eight in the South, reducing Office Depot's North American store base to 1,163 locations.

The company will likely take fourth-quarter and 2009 charges ranging from $270 million to $300 million, comprised of lease payments on closed stores and severance for sales and headquarters staff. The charges will be partially offset by cash received for liquidated inventory and assets.

The pullback in new store openings will help reduce total capital spending to less than $200 million next year.

Office Depot said further cost-cutting actions are being considered, including the possible restructuring of businesses.

The company had a net loss of $7 million in the third quarter, ended Sept. 27, and sales declined 7 percent to $3.7 billion.