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What: Shares of office supply retailer Office Depot, Inc. (NASDAQ:ODP) surged 18% today after its quarterly results and outlook impressed Wall Street.
So what: The stock has slumped in recent months on concerns over slowing growth, but today's Q1 results -- adjusted earnings per share of $0.07 topped the consensus by $0.04 on a revenue spike of 60% -- coupled with upbeat guidance are quickly easing those worries. Management also announced that it would close at least 400 stores in the U.S. over the next two years, leading to annual run-rate savings of at least $75 million by the end of 2016, giving analysts plenty of good vibes over Office Depot's profitability as well.
Now what: Management also raised its estimated total annual run rate of synergies to more than $675 million by the end of 2016, versus its prior outlook of more than $600 million. "One of our 2014 critical priorities is to improve our store footprint in North America to best meet customer demand, ensure we are appropriately positioned in the markets we serve, and align with our unique selling proposition which we are developing this year," said Chairman and CEO Roland Smith. "The overlapping retail footprint resulting from the merger provides us with a unique opportunity to consolidate and optimize our store portfolio, while maintaining the retail presence necessary to serve our customers." Given the strong long-term competitive headwinds continuing to work against Office Depot, however, conservative Fools would do well to remain on the sidelines.
Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.