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Opportunity In Volatility - Research Report On Staples And Office Depot

Stocks in this article: ODP SPLS

NEW YORK, January 23, 2013 /PRNewswire/ --

The office supply industry has been hit by underachieving domestic sales and a steep demand drop in international markets, specifically Europe. Segment leader Staples, Inc.'s (NASDAQ:SPLS) [ Full Research Report] [1] stock price has fallen 30 percent since peaking in early last year and close competitor Office Depot (NYSE:ODP) [ Full Research Report] [ 2 ] is looking to maintain relevance as margins press further.

Staples is trying to bounce back with two debt deals, the repurchasing of up to $750 million of its only outstanding bond and new bond offerings with proceeds going towards the original bond repurchase alongside other expenses. These instruments will be replacing the company's existing debt of $119 million in short-term debt and $1.542 billion in long-term debt. According to a Motley Fool report, the new debts will be incurring much less interest payments, saving Staples as much as $73.125 million in annual interest payments. Many analysts continue to support a "buy" rating, albeit in the short-term, given how these measures could help Staples grow its net.

On the other hand, Office Depot may not be as fortunate as its segment leader. It may have been bullish as of late, but increased competition and lackluster sales could cause the company to considering merging with another competitor, OfficeMax.

A Motley Fool report says Office Depot cannot compete with Staples in pricing and in distribution, and while it is cutting costs and closing stores, it is unlikely that the company can turn around. The company had previously posted losses in the second quarter, and its sales are declining at a higher rate than Staples'.

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