2019: ‘Omnichannel’ and ‘transformation’ remain the two key words at Office Depot, as the US big box operator endeavours to maximise sales in all its operating channels while at the same time maintaining its focus on further honing in on the B2B Business Solutions Division (BSD).
Under the leadership of CEO Gerry Smith, Depot has continued to make progress over the past year. Indeed, in its Q2 results, Smith referred to a “compelling demonstration” of how it has been implementing its strategy and utilising its B2B platform.
At first glance, that demonstration was not apparent, as sales fell by 2% year on year and the reseller swung to an operating loss of $24 million after spending $30 million on its Business Acceleration Programme (BAP) and $25 million on an FTC settlement.
However, adjusted operating profit was up thanks to BSD, while CompuCom moved back into the black after the steep losses in the first quarter. About 60% of sales and 90% of operating profit came from BSD in Q2. That leaves plenty to do for Depot’s retail network, as a sizeable 40% of sales but just 10% of operating profit can be attributed to that division.
As part of its omnichannel approach, Office Depot stores should act as a local hub, co-working space, service area, print shop, click-and-collect pick-up location as well as community focal point. Smith and his teams are certainly moving in the right direction in terms of how retail needs to evolve, but there’s seemingly a long way to go still.
2018: About 20 months into the post now, Office Depot’s CEO Gerry Smith had a year that was perhaps a little less dramatic than that of its chief rival Staples in terms of potential overall impact on the industry, but it was equally as eventful. Smith’s strategy to become a more driven and energised B2B services-focused, omnichannel reseller with a real penetration into the SMB market is beginning to bear fruit.
The US-based reseller added three more very sizeable independent dealers to its portfolio over the past year – Western US dealer Complete Office Solutions in October 2017, New Mexico-based Sandia Office Supply in March 2018 and then finally leading Chicago area reseller Garvey’s Office Products in August.
The acquisitions added several hundred million dollars to Depot’s top line. All three companies continue to operate under the same names and are separate entities within Depot’s Business Solutions Division (BSD), essentially meaning that Depot merely acts as a wholesaler for these local dealers.
Starting to reflect the importance of the acquisitions as well as its e-commerce growth, in its Q2 results, BSD reported sales of $1.3 billion, up 4% compared to the second quarter of 2017. Without the impact of the added dealers, sales were relatively flat vis-à-vis the prior year.
Retail continued to be down 5% to $1.05 billion but overall, Depot’s Q2 results were heavily influenced by last year’s acquisition of CompuCom, pushing total company sales up 11% to just over $2.6 billion.
Smith was certainly pleased with the company’s performance in the quarter and says that “the execution of our strategy is driving improved sales trends across all three of our operating divisions”.
Office Depot also completed the sale of the OfficeMax business in New Zealand to Platinum Equity in May.
2017: Gerry Smith was named CEO of Office Depot in February 2017, succeeding Roland Smith who retired from the company after three years at the helm.
Addressing its strategic goals remains a work in progress at the big-box operator. Indeed, the goalposts themselves have seemingly been moved under Smith’s leadership. For a start, there appears to be more of a retail – or perhaps more appropriately omnichannel – focus at the reseller.
In its most recent quarterly results, Depot’s sales performance at the Business Solutions Division (BSD) were disappointing, with the top line down 6% compared to the year-ago quarter. This was despite expectations that sales trends in BSD would begin to improve following the disruption that occurred during the failed merger process with Staples.
Smith had already said previously that the reseller’s stores would play a pivotal role in the company’s future and be a key part of its supply chain footprint as it ramps up initiatives such as buy online/pick up in store and ship from store. There has also been good news from its ‘store of the future’ pilot stores, which have reported improved sales versus its traditional group of stores.
Smith is clearly not putting all his eggs in one basket, preferring instead an all-round integrated purchasing experience for customers. In September, the company started collaborating with supply chain software platform Elementum to help boost e-commerce operations and strengthen its omnichannel operations.
Having previously worked in senior roles at global technology firms Lenovo and beforehand Dell, Smith has become well-versed in defining and leading ambitious growth objectives and operational efficiencies, driving both increases in market share and profitability at the two companies.
When Smith was appointed, Warren Bryant, Lead Director of Depot’s Board of Directors and Chair of the CEO Search Committee, referred to his “significant operating expertise” and his “ability to lead large, complex organisations”.