In last year’s May issue of OPI, we speculated on how successful Steve Odland’s appointment as Office Depot’s new CEO would prove to be.
Taking over from Bruce Nelson, Odland came with a solid reputation but his appointment still presented itself as a ‘wait and see’ scenario. Our introductory article back then was rather cheekily entitled Wizard of Od?
A year on and Citigroup’s upgrade of Office Depot has come courtesy of the most ringing of ringing endorsements for the head man. Odland certainly seems a good place to be at the moment. Citigroup said: "While it is rare that we attribute an upgrade to just one individual, we believe Office Depot’s future success will be dependent on the implementation of Steve Odland’s vision. Odland’s career has been defined by thinking outside the box and not relying on historical frameworks to drive shareholder value."
Harking back to Odland’s time as CEO of retailer AutoZone, it added: "Who would have thought in 2001, when Odland became CEO at AutoZone, that he could turn an 8 per cent operating margin business into a 17.8 per cent operating margin business in less than five years? Before Odland accomplished this goal, 17 per cent operating margins at retail were rarely, if ever, heard of."
Dan Binder from Buckingham Research agrees that Odland has done an impressive job at Depot, but also applauds the work of the team around him.
He said: "I think Steve Odland would agree with me that in the early days of his tenure there were changes about in retail, driven by Rick Lepley and Chuck Rubin, that were showing good results. I think he would also agree with me in saying that under his leadership some opportunities were accelerated. Like in many things, leadership in retail is key to a turnaround. He helped focus the organisation on the right things. Ultimately, many other members of management have to execute on the ideas to make things happen and generally speaking, I think they have done a great job at that.
Citigroup believes Depot is in "the very early stages of a transformational turnaround" and sees increase in private brand penetration as one of the five drivers of future operating margin expansion.
Based on "conversations with Mr Odland", Citigroup said it believes private brand penetration will grow from 20 per cent today to more than 50 per cent in five years and will provide the largest driver of operating margin expansion.
Other key drivers are expected to be the aggressive implementation of a "good, better, best" merchandising strategy and expansion of global sourcing and global branding.
Citigroup also moots Buhrmann as a possible acquisition target for Odland and Depot.
It said: "In our view, an acquisition of Buhrmann would enable Office Depot to expand its global reach, improving purchasing power and market share, remove some pricing pressures from the industry and help the company lever its fixed assets."
