(Reuters) - Office supply retailer Office Depot's quarterly profit and sales beat market estimates, driven by cost cutting initiatives and higher-than-expected savings from the acquisition of OfficeMax Inc.
Shares of the company, which bought rival OFFICEMAX (OMX.NY)for $976 million in a deal that closed last November, rose 14 percent to 5.77 in premarket trading on Tuesday.
Office Depot said it now expects the cost benefits of the OfficeMax acquisition to more than offset weak sales trends for the rest of the year and a year-over-year increase in incentive compensation expense.
The company and larger rival Staples Inc
Office Depot said on Tuesday that it still expects 2014 sales to be lower than 2013, while Staples warned in August that third-quarter sales could fall as demand slowed in a saturated market.
Office Depot said pro-forma sales in North America fell 7 percent to $1.72 billion in the third quarter ended Sept. 27. Same-store sales fell three percent, in line with the average analyst estimate, according to research firm Consensus Metrix.
However, margins in the division, which accounted for 42.3 percent on total sales in the quarter, rose to 4.6 percent on a pro-forma basis from 1.9 percent.
Office Depot's Chief Executive Roland Smith, a turnaround specialist brought in last year, has been aggressively cutting costs and working to bring the company back on track.
Office Depot said revenue rose to $4.07 billion from reported sales of $2.62 billion a year earlier.
Net income attributable to common shareholders slumped 78 percent to $29 million from a year earlier, which was boosted by a gain from the sale of its Mexico joint venture. Excluding items, Office Depot earned 10 cents per share.
Analysts on average expected a profit of 9 cents per share on revenue of $4.05 billion, according to Thomson Reuters I/B/E/S.
Up to Monday's close, Office Depot stock had fallen 4.2 percent this year, compared with a 4.3 percent rise in the broader Dow Jones U.S. specialty retailers index <.DJUSRS>.
(Reporting By Yashaswini Swamynathan in Bangalore; Editing by Feroze Jamal and Savio D'Souza)
