Staples merger to cut stores

Written By Unknown on Jumat, 06 Februari 2015 | 18.38

Hundreds to as many as a thousand Staples and Office Depot store closings are expected if federal regulators sign off on the planned $6.3 billion merger of the nation's two largest office supplies chains.

With about half of their combined 3,200-plus U.S. stores within five miles of each other, Citi analyst Kate McShane estimates more than 500 locations could be closed. "We think store closings are likely to be announced down the road, once the deal is approved by the (Federal Trade Commission) and closed," McShane said.

Those closings would be on top of ones already planned by the individual companies, which are downsizing their retail footprint as they struggle to compete with online rivals. Staples has about 55 stores slated to be closed out of 225 it previously announced as part of its retail "reinvention." Office Depot has about 235 stores remaining to be shuttered out of 400 planned closures, according to McShane.

The store closings would be a small part of the estimated $1 billion-plus in annual cost savings that the two companies expect by the end of the third year after a merger closed.

"Store closings and real estate optimization as well as sales initiatives may bear fruit over time, but for now sales and margins continue to decline," said Carol Levenson, director of research, at Gimme Credit, a corporate bond research service.

About 1,000 store closings — either voluntary or forced by the FTC — are expected by Janney Capital Markets analyst David Strasser. That would save the merged company 
$350 million-plus in rent expenses, he said.


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