By midmorning, shares had taken off 12.6% to $4.68. Competitor Staples (SPLS) was falling in sympathy, declining 4.9% to $12.73.
The company recorded a net loss of $144 million, or 34 cents a share, in the three months to Dec. 28. Excluding one-time expenses, the net loss was 3 cents a share. Analysts surveyed by Thomson Reuters had anticipated adjusted profit of 3 cents a share.
CEO Roland Smith, who has had prior experience in successfully reorganizing merged companies, expects the integration to be completed by the end of February.
"We have moved quickly to establish a lean organizational structure," he said in a statement. "Based on the team's efforts since merger close, we have validated and increased the expected total annual run-rate of previously quantified cost synergies to be more than $600 million by the end of 2016."
Total sales of the office supply chain benefited from the November merger with revenue 33% higher to $3.49 billion. However, consensus was for a far higher increase to $4.03 billion.
In its North American retail division, the Boca Raton, Florida-based business recorded a same-store sales decline of 4% for the quarter and 3.7% for fiscal 2013.
For fiscal 2014, the company expects market trends to remain challenging with total company sales lower than 2013. Capital spending will likely be around $150 million with an additional $50 million in integration expenditures.