Office Depot Closing Stores Cutting 2,200 jobs

Office Depot has announced it will close 112 stores and cut nearly 2,200 jobs over the next three months in what it is calling an "Update of Strategic Review".

The stores to be closed are located all across the country, including 45 in the Central U.S., 40 in the Northeast and Canada, 19 in the West and eight in the South. Additionally, 14 stores will be closed through 2009 as their leases expire or other lease arrangements are finalized. The company also plans to close six of its 33 distribution facilities in North America.

The Company anticipates taking charges in the fourth quarter 2008 and in 2009 for these actions totaling in a range from $270 million to $300 million. The cash component of these charges is projected to be approximately $40 million over the next twelve months and is comprised of continuing lease payments on closed stores; and severance for store, headquarters and field sales staffing; partially offset by cash received for liquidated inventory and assets. The remaining non-cash and future cash charges of approximately $230 million to $260 million are comprised principally of fixed asset write-offs and lease reserves on closed stores.

Office Depot says these actions should benefit 2009 EBIT and cash flow by approximately $90 million and $70 million respectively. The benefit to cash flow is primarily a result of lower 2009 capital spending, payroll savings and operational improvements from store closures. Further actions are being contemplated and are expected to result in additional charges to be recognized in the fourth quarter of 2008 and into 2009. These actions include the assessment of tangible and intangible assets, including the annual goodwill evaluation, and potentially restructuring businesses."