Gathering of the Office Depot Inc (ODP) Supply Stores

Wal-Mart Stores, Inc. (NYSE:WMT)

While it doesn’t specialize in office supplies and therefore isn’t a direct competitor to either Office Depot or Office Max, Wal-Mart does supply a lot of office supplies on an ad hoc basis. I know a great many firms that use the giant retailer for their paper, ink and small business equipment without ever hitting an office supply store. There’s less hassle in doing it that way for the smaller ones. What Wal-Mart won’t get is the monstrous large contracts from major buyers. I don’t think it worries them, though. The firm’s profits are up for Q4, after all. The firm’s stock is up 20% since last April, and it pays a 2.30% dividend. I think it’ll get by.

Costco Wholesale Corporation (NASDAQ:COST)

The same argument applies to Costco as applies to Wal-Mart. While they don’t specialize in office supplies they do siphon off some of the retail business away from the big specialty stores. The issue becomes just how much of it they get. Still, there’s money to be made with Costco. January year-over-year numbers are up, and the stock has grown 22% since last May. I actually have more faith in Costco as a general retailer than I do Wal-Mart. The 1% dividend isn’t great, but at least it’s an indication that the firm acknowledges it needs a dividend.

Look, the whole merger thing is still going to have to jump through the regulatory hoops. Various people will complain that it’s non-competitive. It’s not, of course, but they’ll complain that it is. Don’t let them influence your investment decisions. The merger will go through. The real thing you, as an investor, have to decide is whether you think the combined store will do well in the environment. Can a big box specialty office supply retailer continue to thrive? Once you have an answer to that, make your investments and see where it goes.

Good luck!

The article Gathering of the Office Supply Stores originally appeared on Fool.com and is written by Nate Wooley.

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