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Today's Analysis On Office Depot And OfficeMax: Improving Labor Market A Boon

Stocks in this article: ODP OMX

LONDON, January 22, 2013 /PRNewswire/ --

Back in September 2012, Federal Reserve Chairman Ben Bernanke announced an aggressive bond buying program to boost economic growth. Under QE3, as the bond buying program is called, the Fed pledged to buy mortgage backed securities worth $40 billion every month until there is a sustained recovery in the labor market.

Since the Fed announced QE3, the labor market has shown signs of improvement albeit at a very slow pace. The unemployment rate has dipped below 8%. On Thursday, a report from the Labor Department showed that initial jobless claims fell to a five-year low last week.

OfficeMax and Office Depot Turned in Profits

All these augur well for office supply companies OfficeMax Incorporated (NYSE: OMX) and Office Depot Inc. (NYSE: ODP). Reports on these companies have been posted for free at    

Both OfficeMax and Office Depot turned in a profit in their most recently reported quarterly results. However, the profit was generated mainly due to cost-cutting measures. Both companies also posted a drop in sales in the quarter. StockCall technical report on OfficeMax is available now for download. Sign up at

Although the labor market has shown signs of improvement, office supply companies are still operating in a tough environment. Some analysts believe that the best course of action for the two companies would be to merge. Back in November last year, Caris & Co. said that combining the two companies is the most logical way to spur profit growth and cut costs via store closures. However, the two companies have not shown any interest in a possible merger. Instead they are focusing on streamlining their operations.

Streamlining Operations

OfficeMax and Office Depot have been closing stores or reducing square footage in order to reduce costs. The companies have also been expanding their online sales.

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