Why Office Depot Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Office Depot (NYS: ODP) were rocketing higher today, up as much as 20% after a surprising earnings report.

So what: Thanks to lower costs, the office-products retailer turned in an adjusted earnings per share of $0.06 despite revenue declining 5% and same-store sales falling 4%. That figure easily beat the Street's EPS estimate of a penny. Without adjustments for restructuring and impairment charges, the company posted a loss of $70 million; however, free cash flow clocked in at $190 million for the quarter.

Now what: In many ways, office retailers are a perfect storm of dying industries. Demand for items like paper products, office electronic staples such as PCs, printers, and faxes, and even for bricks-and-mortar stores themselves is all declining. It's no surprise to see a company like Office Depot posting negative top-line growth, and its P/S valuation of $0.06 indicates Wall Street has little confidence in a turnaround. Cutting costs will only go so far. Unless it can find a way to reverse its sales slide, this company is going the way of the dinosaurs.

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The article Why Office Depot Shares Popped originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.

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