The first Northeastern M2 stores the retailer is opening are inLargo, MD; Nashua, NH; and N. Attleboro, MA. The expansion into theregion was helped by the company's acquisition of 124 former Kids'R' Us units earlier this year from Toys 'R' Us for $197million.

Office Depot is growing in an area where Staples is the marketleader, but the region has room for both, says Ulysses Yannas, aretail analyst with New York City-based Buckman, Buckman &Reid. "It isn't saturated because one company does not saturate amarket," he says. "Staples has done what it's done, but there'sroom for another guy."

The M2 stores are cheaper to build than the majority of the 923units in the Office Depot chain, company officials say. Remodelingan existing store into an M2 costs from $250,000 to $300,000, about$100,000 less than a typical Office Depot renovation. And M2 unitsare about 6,000 sf smaller, averaging 20,000 sf, so they can enterareas where the older stores aren't able to fit.