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Office Depot to shut 112 stores, slash 2,200 jobs

Plans include closing six distribution sites. Analysts doubt the steps will fix the firm's financial woes.

December 11, 2008|associated press

Office Depot Inc. will close about 9% of its North American stores and cut 2,200 jobs over the next three months while planning to open fewer locations next year in an effort to cut costs.

The plan to close 112 stores will reduce the chain's base to 1,163. It plans to close 45 stores in the Central U.S., 40 in the Northeast and Canada, 19 in the West and eight in the South.

Office Depot, which began the year with about 49,000 workers, also will close six of its 33 North American distribution facilities.

Meanwhile, the Delray Beach, Fla., company said it planned to shut an additional 14 stores next year while opening just 20 new sites, half of what it planned.

Analysts said the move would probably give the company a much-needed short-term financial boost. But they said they doubted the effort would be enough to fix the company's financial condition.

"It's not enough to really close the gap and make a meaningful impact compared to Staples and the mass-merchant competitors," Morningstar analyst R.J. Hottovy said. "But it's probably a Band-Aid on a flesh wound."

Goldman Sachs analyst Matthew Fassler said Wednesday's announcement -- although widely anticipated after the company announced it was starting a strategic review in October -- involves more locations than many expected.

"We view this program favorably," he told investors in a research note. "We expect [Office Depot] shares to benefit from this announcement, though it does not significantly counteract the tough reality of low underlining profitability, and obviously does not remedy cyclical challenges."

Office Depot will take related charges of $270 million to $300 million in 2008 and 2009.

The company's shares rose 22 cents to $2.65.

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