Office Depot to shut another 300 stores

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Can Closing 300 Stores Save Office Depot From Demise?

Office Depot Inc (ODP.O), which scrapped a plan to merge with larger rival Staples Inc (SPLS.O) in May on antitrust concerns, said it would close about 300 more stores in the next three years to help cut annual costs by $250 million by the end of 2018.

Office Depot also initiated a quarterly dividend and increased its share buyback plan.

The office supplies retailer's shares rose as much as 6 percent to $3.49 in late-morning trading. Office Depot, which closed 400 U.S. stores by the end of the second quarter, reported the seventh straight drop in its quarterly sales.

Conlumino analyst Carter Harrison called the additional store closures a welcome move, adding that it was "the correct response to a market that is still overcapacity."

Click through to see other struggling department stores in 2016:

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Struggling department stores
TORONTO, ONTARIO, CANADA - 2016/03/08: Sears store entrance, is an American chain of department stores. Known for selling high quality clothing article from shoes to shirts. (Photo by Roberto Machado Noa/LightRocket via Getty Images)
Macy's Inc. signage is displayed at a department store in New York, U.S., on Monday, Feb. 22, 2016. Macy's Inc., the largest U.S. department-store company, is scheduled to report fourth-quarter 2015 earnings before the opening of U.S. financial markets on February 23. Photographer: Michael Nagle/Bloomberg via Getty Images
J.C. Penney Co. signage is displayed outside of a store at the Gateway Shopping Center in the Brooklyn borough of New York, U.S., on Saturday, Aug. 8, 2015. J.C. Penney Co. is scheduled to release earnings figures on Aug. 14. Photographer: Michael Nagle/Bloomberg via Getty Images
UNITED STATES - JUNE 09: Customers enter the Dillards department store at Parkdale Mall, in Beaumont, Texas, Wednesday morning, June 9, 2004. A judge declared a mistrial in a lawsuit brought against Dillard's Inc. by 17 black shoppers in Texas who claimed that security guards at the department store chain harassed them because of their race. (Photo by Scott Eslinger/Bloomberg via Getty Images)
MIAMI, FL - APRIL 19: A Nordstrom sign is seen outside a store on April 19, 2016 in Miami, Florida. Nordstrom on Monday said in a cost-cutting measure they are expecting to lay off 350 to 400 people. (Photo by Joe Raedle/Getty Images)
The sign outside the Kmart store is seen in Broomfield, Colorado November 19, 2009. Sears Holdings Corp posted a narrower-than-expected quarterly loss November 19, 2009, helped by the first increase in same-store sales at its Kmart unit in four years. REUTERS/Rick Wilking (UNITED STATES BUSINESS)
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Both Staples and Office Depot have been hit by competition from online retailers such as Amazon.com Inc (AMZN.O) that have been discounting school and office supplies. The two retailers have announced a slew of cost-cutting measures since their merger was called off.

Besides store closures, Office Depot is also planning to cut costs by reducing procurement and general and administrative expenses.

Office Depot, which had 1,513 stores in North America and about 1,800 globally at the end of the second quarter, said it plans to open more smaller-format stores.

The company said it had initiated a quarterly dividend of 2.5 cents per share, citing its "strong liquidity position and confidence in the ability to generate future cash flow", and increased its stock buyback plan to $250 million from $100 million.

The retailer cut its adjusted operating income forecast for 2016 to $450 million-$470 million, from $500 million, blaming the "adverse impact on the company's sales resulting from the prolonged Staples' acquisition attempt."

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Office Depot reduced its capital expenditure budget for 2016 by $75 million to about $175 million.

The company reported net income of $210 million, or 38 cents per share, for the second quarter ended June 25, compared with a loss of $58 million, or 11 cents per share, a year earlier.

Excluding items, the Boca Raton, Florida-based company earned 3 cents per share, missing the average analyst estimate of 6 cents.

Sales fell 6.5 percent to $3.22 billion, roughly in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.

(Reporting by Gayathree Ganesan in Bengaluru, additional reporting by Sruthi Ramakrishnan; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Maju Samuel)

RELATED: See American's favorite retail brands of 2016:

25 PHOTOS
Top retail brands for millennials
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Top retail brands for millennials

24. Levi's 

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23. Calvin Klein

Photo via Getty

22. Ralph Lauren

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21. Michael Kors

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20. Walmart

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19. Macy's

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18. Vans

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17. Old Navy

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16. Converse

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15. Adidas

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14. Gap

Photo via PA Wire

13. Under Armour

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12. Bath & Body Works

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11. Nordstrom

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10. Target

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9. Urban Outfitters

Photo via PA Wire 

8. J.Crew

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7. H&M

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6. Sephora

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5. Lululemon

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4. Zara

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3. Forever 21

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2. Victoria's Secret

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1. Nike

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