Does Office Depot Inc (ODP) Still Have a Chance?

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Office Depot Inc (NASDAQ:ODP) CEO Roland Smith will retire, putting a period on a failed bid to merge with Staples, Inc. (NASDAQ:SPLS) and all-but assuring more short-term pain for ODP stock.

Does Office Depot Inc (ODP) Still Have a Chance?Smith will step down early next year. Ron Sargent, his counterpart at Staples, resigned in June soon after a federal judge blocked the proposed merger of the nation’s two largest office supply chains on antitrust concerns.

Smith will continue to serve as CEO until a successor is named — likely in the first quarter of 2017 — and will stay on as chairman. As he said in a statement:

“My decision to retire has not been an easy one. In 2013, I set aside a number of personal ambitions to accept a three-year contract with Office Depot, and it’s now time for me to refocus on those priorities.”

There’s little mystery as to why the chiefs called it quits. ODP and SPLS actually tried to merge once before in the 1990s. At that time, anticompetitive concerns made sense. But with the rise of Amazon.com, Inc. (NASDAQ:AMZN) and e-commerce in general, Smith and Staple’s Sargent were desperate to address an existential crisis.

No knock on these chiefs, but with their strategy scuttled by the Federal Trade Commission, it’s time for new ideas of how to navigate ODP and SPLS seemingly inevitable decline.

Is There a Point to ODP Stock?

Anyone who has followed other left-for-dead retail chains knows that they can offer opportunities for tactical investors and traders.

Have a look at Best Buy Co Inc (NYSE:BBY). Consumer electronics chains are arguably in worse shape than office supply stores, and yet BBY routinely rips off rallies lasting anywhere from one to three months.

Or take GameStop Corp. (NYSE:GME). It tends to serve up lots of opportunities for well-timed entries and exits. It’s even beating the broader market so far this year.

ODP stock could become a similar vehicle for active traders or tacticians, even as the longer-term prognosis remains poor. It certainly helps that the company is slashing costs and initiating a dividend.

Beyond that, it’s hard to love ODP for the long haul. Revenue is expected to decline for the foreseeable future, and it’s not clear the retail landscape can support two national chains.

The scuttled merger between ODP and SPLS was these firms’ best hope for remaining vital on any kind of strategic time scale. As things stand now, Office Depot stock is probably going to bounce around a lot. That may be appealing to a certain type of market participant. Just don’t mistake it for a long and strong.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/office-depot-stock-odp-roland-smith/.

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