Office Depot, Inc. (NYSE: ODP) reported Q1 EPS of $0.07, $0.04 better than the analyst estimate of $0.03. Revenue for the quarter came in at $4.35 billion versus the consensus estimate of $4.28 billion.

Roland Smith, chairman and chief executive officer of Office Depot, Inc., noted, “We are pleased with our first quarter performance. After a weather-challenged start to the year, sales trends improved as the quarter progressed, and we exceeded our expectations for both cost reduction and operational execution. With our new organizational structure established and leadership team largely in place, the execution on our critical priorities is improving, and we are delivering merger integration synergies more quickly than anticipated. Accordingly, we have increased our full year 2014 outlook for adjusted operating income to be not less than $160 million from our prior outlook of not less than $140 million.”

Smith added, “One of our 2014 critical priorities is to improve our store footprint in North America to best meet customer demand, ensure we are appropriately positioned in the markets we serve, and align with our unique selling proposition which we are developing this year. The overlapping retail footprint resulting from the merger provides us with a unique opportunity to consolidate and optimize our store portfolio, while maintaining the retail presence necessary to serve our customers. Based on our preliminary analysis, we expect to close at least 400 locations in the U.S., with 150 stores slated to close in 2014. We anticipate the total store closures will generate annual run-rate synergies of at least $75 million by the end of 2016 and will begin to be accretive to earnings in 2015.”

Outlook

For the remainder of 2014, Office Depot continues to expect that market trends will remain challenging across the company’s product lines and distribution channels, and therefore continues to anticipate total company sales in 2014 will be lower than 2013 combined pro forma sales. The expense deleverage from lower sales is expected to offset a portion of the merger synergies and operating improvements anticipated during the year. Based upon earlier than expected realization of cost synergies and improved operational execution in the first quarter, the company now expects to generate adjusted operating income of not less than $160 million in 2014 compared with its prior outlook of not less than $140 million.

Including at least $75 million in annual run-rate synergies from the optimization of the U.S. retail store portfolio, the company also raised its estimated total annual run-rate of synergies to more than $675 million by the end of 2016, compared its prior outlook of more than $600 million. Of those synergies, the company now expects to realize approximately $180 million during 2014, and end the year with an annual run-rate of approximately $360 million, not including any benefit from the retail store network optimization.

The company continues to estimate that $400 million of cash merger integration expenses will be required during the three-year period of 2014 through 2016 to substantially complete the integration, excluding costs related to optimizing the U.S. retail store portfolio, which have not yet been determined. Approximately $300 million of these cash integration expenses will be incurred in 2014. The company continues to anticipate integration capital spending of approximately $200 million to $250 million during the 2014 through 2016 period. In 2014, the company expects capital spending to be approximately $150 million, excluding up to an additional approximately $50 million in integration expenditures. Depreciation and amortization is expected to be approximately $300 million in 2014.

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