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Here's Why Office Depot is Marching Ahead of the Industry

Zacks Equity Research

A glimpse of Office Depot, Inc.’s ODP share price movement reveals that it has surged roughly 18.1% in the past six months. The stock has not only outperformed the industry that witnessed a decline of 7.1% but also the sector’s improvement of 5%.

Let’s Introspect

Office Depot has been making every effort to refashion itself in a bid to counter an environment where demand for office products (paper-based) has shrunk thanks to technological advancements. The company has initiated Business Acceleration Program that involves reducing costs, improving operational efficiencies, enhancing service delivery, utilizing technology and automation efficiently and identifying strategic investment opportunities.

Further, the company is concentrating on e-commerce platforms and focusing on providing innovative products and services. The company’s initiative of buy online and pick up in-store is gaining traction. In this direction, the recent collaboration with Shipt — an Internet-based delivery service owned by Target TGT — to provide quick and convenient shopping experience, is commendable. Shipt members can now buy different office supplies, including the latest tech, cleaning and breakroom products, business supplies and more.


 

The company has been focusing on improving conversion, product assortment mix and exploring store-within-a-store opportunities. The company has been improving in-store shopping experience and expanding into adjacency categories. Adjacency categories account for approximately 37% of total Business Solutions Division sales. The company has been also making incremental investments to restructure itself into a product and services-driven enterprise. Management intends to increase revenue contribution from services to approximately 20% of total sales.

Further, Office Depot is on track to revive sluggish CompuCom segment, which was touted to help the company adapt to the fast-changing retail landscape along with providing enterprise-level tech services and products to customers. In doing so, the company undertook strategies — including streamlining operational structure, exploring options to speed up cross-selling opportunities and restructuring customer-facing organization.

All said, we hope that this Zacks Rank #3 (Hold) company’s well chalked out endeavors will help it sustain momentum in the days ahead.

2 Stocks to Watch

DICK’S Sporting Goods DKS has a long-term earnings growth rate of 5.7%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy BBY has a long-term earnings growth rate of 8.7% and a Zacks Rank #2 (Buy).

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