Office Depot (ODP) is learning the hard way what a merger battle could do to business.
On Tuesday, the office supplies retailer -- which has endured more than a year of trying to get regulators to approve a sale to bigger rival Staples (SPLS) -- reported worse-than-expected fourth-quarter earnings. For the quarter, earnings excluding one-time items came in at 7 cents a share, unchanged from the prior year, but fell short of Wall Street estimates of 11 cents. Same-store sales were also unchanged year over year at the company's more than 1,500 North American retail stores. In the third quarter, same-store sales increased a solid 3%.
At the company's business solutions segment, which primarily ships office supplies under contract to businesses, sales declined 6% when excluding the impact of the strong U.S. dollar. Office Depot attributed the sales drop to "substantial business disruption" related to the pending acquisition by Staples.
"We were pleased to deliver another year of strong operating results in 2015, despite experiencing substantial business disruption related to the pending acquisition by Staples," said Roland Smith, chairman and CEO of Office Depot in a statement.
Office Depot may continue to see its business disrupted thanks to Staples in coming months.
In a statement on Dec. 21, Staples said the Federal Trade Commission rejected its proposal to divest up to $1.25 billion of commercial contracts in order to gain approval to acquire Office Depot. According to Staples at the time, the FTC did not issue a counter proposal. The company said it was willing to continue negotiations with the FTC to reach a settlement that addresses antitrust concerns, while also noting that it's pursuing the transaction through litigation.
An administrative trial to decide whether or not the deal can go through is scheduled to begin on May 10.
On Feb. 16, Staples and Office Depot took a step to more formally alleviate regulator concerns. The companies announced an agreement to sell more than $550 million in corporate contract business and related assets to office supplies wholesaler Essendant. Essendant will pay Staples about $22.5 million for the business. The deal will only go through if the merger between Staples and Office Depot is completed.
The FTC strongly criticized Staples' proposed remedy in a brief made public late Friday.