Office Depot Inc.
(
ODP
), a global supplier of office products and services, recently
announced a new deal with
Newell Rubbermaid Inc.
(
NWL
). As per the new deal, Rubbermaid storage products will be
available at Office Depot brick and mortar and online stores.
Office Depot believes that the new deal will drive growth
opportunities and open several avenues for the company in the
storage and organization solution industry. The company already
sells a few Rubbermaid products at its stores and is looking to
expand the range of products given the growth prospects in the
category.
Newell Rubbermaid foresees several new prospects across the
industry and believes that the deal will help expand its customer
base and drive the company's sales going forward.
Office Depot recently posted first-quarter 2012 earnings of 5
cents a share, a sharp improvement from the break-even results in
the comparable prior-year quarter. However, reported earnings came
in line with the Zacks Consensus Estimate.
The company's total revenue of $2.87 billion decreased
approximately 3% year over year and was almost in line with the
Zacks Consensus Estimate.
Management now expects total sales for the second quarter of
2012 to decline 3% from the year-ago quarter, and further hinted
that adjusted operating income would decline $20 million to $30
million. Further, Office Depot forecasted that the North American
Retail division's comparable-store sales would decline in the
second quarter, and expects International division sales to fall 4%
to 5% in constant currency.
Conclusion
We believe that the company's strategic plan to enter the
fast-growing storage and organization industry will prove to be
accretive to sales growth.
However, due to high exposure to international markets, Office
Depot remains prone to currency fluctuations. The weakening of
foreign currencies against the U.S. dollar may require the company
to either raise prices or see its profit margins contracting in
locations outside of the U.S. An increase in price may have an
adverse impact on the demand for the products.
Office Depot faces stiff competition from office supply
retailers, such as
OfficeMax Inc.
(
OMX
) and
Staples Inc.
(
SPLS
), and wholesale clubs, discount stores, mass merchandisers,
computer and electronics superstores on attributes such as store
format, pricing strategy and in-stock consistency. This may weigh
upon the company's results.
The company carries a Zacks #3 Rank, which implies a short-term
Hold rating. However, the company holds a long-term Underperform
recommendation.
NEWELL RUBBERMD (NWL): Free Stock Analysis
Report
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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