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Office Depot to close 112 stores, 3 in Florida

Businesses have cut spending on office supplies so deeply that Office Depot Inc. said Wednesday that it will close 112 stores and six of its 33 distribution centers.

That's about 9 percent of its retail footprint in North America.

The closings, triple what the Delray Beach retailer normally does yearly to adjust for shifting market conditions, will be spread over the next three months. Sales in North America plunged 11 percent — 14 percent in stores open more than a year — in the third quarter.

The company, which operates 15 stores in the bay area, is closing just three Florida stores, in Jensen Beach, Daytona Beach and Haines City. Gordon Brothers was hired to handle the liquidation sale. The company also cut store openings in half to 20 in 2009. Charges against fourth-quarter earnings will range from $270-million to $300-million.

"We sell discretionary items for businesses, but we don't know when this financial crisis is going to end," Mike Newman, chief financial officer, said Oct. 29 when Office Depot reported an unexpected quarterly loss. "We're slicing and dicing our business with a focus on cash flow and liquidity."

Still under the microscope: exiting business areas such as Japan and selling up to 40 stores to investors for cash and leasing them back.

Office Depot had chopped its inventory by 15 percent in the quarter ended Sept. 27 in response to shrinking demand. But even the improved profit margins proved no salvation when sales in the United States and in states like Florida continued to deteriorate. The company lost $7-million on quarterly sales of $3.7-billion. Rivals Staples and OfficeMax reported similar sales results.

The company's stock price has been battered. From a high of $15.42 in February, it hit a low of $1.50 in the late-November meltdown. Shares closed up 9 percent Wednesday at $2.65.

But a volatile market that values an office supplies retailer with $15-billion in sales at $728-million has riveted management attention on Office Depot's cash and ability to borrow. Office Depot had $400-million in cash and liquidity of $1.5-billion when it released quarterly results a month ago.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

Office Depot to close 112 stores, 3 in Florida 12/10/08 [Last modified: Wednesday, December 10, 2008 10:54pm]
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