(Reuters) - Office Depot Inc ODP.O, which scrapped a plan to merge with larger rival Staples Inc SPLS.O in May on antitrust concerns, said it would close about 300 more stores in the next three years to help cut annual costs by $250 million by the end of 2018.

An Office Depot store is pictured in Encinitas, California, February 19, 2013. REUTERS/Mike Blake/File Photo GLOBAL BUSINESS WEEK AHEAD PACKAGE - SEARCH "BUSINESS WEEK AHEAD AUG 1" FOR ALL IMAGES - RTSKHNZ

Office Depot also initiated a quarterly dividend and increased its share buyback plan.

The office supplies retailer’s shares rose as much as 6 percent to $3.49 in late-morning trading.

Office Depot, which closed 400 U.S. stores by the end of the second quarter, reported the seventh straight drop in its quarterly sales.

Conlumino analyst Carter Harrison called the additional store closures a welcome move, adding that it was “the correct response to a market that is still overcapacity.”

Both Staples and Office Depot have been hit by competition from online retailers such as Amazon.com Inc AMZN.O that have been discounting school and office supplies. The two retailers have announced a slew of cost-cutting measures since their merger was called off.

Besides store closures, Office Depot is also planning to cut costs by reducing procurement and general and administrative expenses.

Office Depot, which had 1,513 stores in North America and about 1,800 globally at the end of the second quarter, said it plans to open more smaller-format stores.

The company said it had initiated a quarterly dividend of 2.5 cents per share, citing its “strong liquidity position and confidence in the ability to generate future cash flow”, and increased its stock buyback plan to $250 million from $100 million.

The retailer cut its adjusted operating income forecast for 2016 to $450 million-$470 million, from $500 million, blaming the “adverse impact on the company’s sales resulting from the prolonged Staples’ acquisition attempt.”

Office Depot reduced its capital expenditure budget for 2016 by $75 million to about $175 million.

The company reported net income of $210 million, or 38 cents per share, for the second quarter ended June 25, compared with a loss of $58 million, or 11 cents per share, a year earlier.

Excluding items, the Boca Raton, Florida-based company earned 3 cents per share, missing the average analyst estimate of 6 cents.

Sales fell 6.5 percent to $3.22 billion, roughly in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.