Office Depot to Shed Business - Analyst Blog
December 21 2012 - 3:40AM
Zacks
Office Depot Inc.
(ODP) – one of the leading suppliers of office products and
services across the globe, announced that it is selling its Hungary
business to Central Fund Venture Capital Fund. However, financial
terms of the deal were not disclosed.
As per the agreement, Central Fund
will provide support to Office Depot's existing customers in
Hungary and will be using Office Depot's trade names and receive
sourcing services. Office Depot commenced its operations in Hungary
in 1997 through licensed operation and later transformed the
business into its wholly owned subsidiary in 2004.
Office Depot is repositioning
itself to keep afloat in a difficult consumer environment. The
company is containing costs, closing underperforming stores,
reducing exposure to higher dollar-value inventory items,
shuttering non-critical distribution facilities, and focusing on
providing innovative products and services, which should all
contribute to margin improvements.
We believe that the move reflects
the company strategic decision to fuel growth by tightening
investment in sections of the company that no longer contribute
significantly to its growth or no longer remain a part of its core
growth strategies.
The company is contemplating to
strengthen its global footprint and reviewing capital-efficient
opportunities to expand its reach in Eastern Europe, Asia and South
America. The company believes that India and China will provide
significant growth opportunities.
Moreover, Office Depot is focusing
on smaller format stores and enhancing shoppers’ experience through
store renovations. This in turn, will facilitate the company in
improving store sales productivity.
Currently, we maintain our
long-term ‘Neutral’ recommendation on the stock. Moreover, Office
Depot, which competes with OfficeMax Inc. (OMX)
and Staples Inc. (SPLS), holds a Zacks #3 Rank
that translates into a short-term ‘Hold’ rating.
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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