Amidst the market expectations of potential merger between Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NYSE:ODP), shares for both the companies witnessed a positive movement. Shares of Staples, Inc. (NASDAQ:SPLS) closed with 8.13% rise in prices whereas Official Depot Inc (NYSE:ODP) had a 6.25% upward movement in its prices.
The shares picked up after a Credit Suisse analyst suggested Staples, Inc. (NASDAQ:SPLS) to purchase Official Depot Inc (NYSE:ODP) as a move against strong online competition. According to Gary Balter, Credit Suisse Analyst,
“Retail is losing share to online and many managements are either wearing blinders or are ignorant to that, and you need someone to wake them up.”
He further added that a merger between these two retail giants will help the combined company reduce its operating costs by $1.44 billion and the company might double its operating income by 2017.
After considering the potential benefits of the suggestion, it might help both the companies to take a stand against increasing online stores. Earlier, Staples, Inc. (NASDAQ:SPLS) announced that it will close up to 140 stores in North America because of poor performance and fierce competition from Wal-Mart Stores, Inc. (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN).
Similarly, Office Depot Inc (NYSE:ODP) is expecting weaker sales for the year because of the competition from online stores. Earlier, the company said that it would close up to 400 stores in the U.S. by 2016 including 165 stores in the current year. In fact sales for both the companies, Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NYSE:ODP), have declined significantly because of the lower-price offerings from Wal-Mart Stores, Inc. (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN).
Balter added,
“There are just too many office suppliers, too many retail stores out there that need to be consolidated. Why not close them out now instead of doing the two-step thing?”
This article has been written by Prakash Pandey.
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