Global News


As this month’s OPI goes to press, the first batch of quarterly results has come in and, as expected, it doesn’t make particularly pleasant reading. Discretionary spending by businesses is being reeled in and this is hitting sectors such as computer hardware, printers and office furniture the hardest. Even basic office and stationery items, normally less impacted than discretionary categories, have taken a hit, with market research firm NPD’s data from the US power channel showing a 15 percent decline compared to last year.


The independent office dealer community has once again shown its resilience in the face of the tough market conditions. United Stationers reported sales to the power channel down by 9 percent in the fourth quarter compared to a 2 percent decrease to the independent channel, although there may be a bigger element of inventory reduction in the big box numbers.


OP companies have been trimming costs for the last year and one wonders how much more room there is to make further reductions before cutting into muscle that could hamper a successful turnaround when the market eventually picks up. Recent actions include reducing salaries, suspending pension plans and bonuses and enforcing temporary production shutdowns in an effort to avoid more redundancies. Future cost-cutting requirements could, unfortunately, lead to more dramatic actions. Let’s hope that won’t be necessary.
Andy Braithwaite, Features Editor, OPI


Acquisitions boost United Stationer’s 2008 sales…


United Stationers 2008 net sales increased 7.3 percent to almost $5 billion, but operating income dipped to $192.4 million from $202.5 million at the end of 2007.


Sales for the year reached nearly $5 billion and were boosted by the acquisitions of ORS Nasco and Emco that contributed about $325 million. United’s gross margin as a percent of sales for 2008 was 14.9 percent, compared with 15.2 percent in 2007.


United’s net income fell to $22.5 million in 2008 from the $28.3 million it banked in 2007. United said that lower sales volume and inventory purchases resulted in reduced supplier allowances, which has negatively affected gross margin, along with the continuing impact of a lower margin product mix. The company said that this was partially offset by the positive effect on gross margin of higher product cost inflation.


Dick Gochnauer, President and CEO of United, said 2008 was challenging but added that the company’s "positive results affirmed the strength of our business model and the success of our strategies."


He added: "We continue to expand our routes-to-market for our suppliers’ products, as well as support our resellers through new investment. In anticipation of further deterioration of the economy, we made proactive cost adjustments in Q4 and earlier this year. Our liquidity and access to credit remain strong and United enters 2009 in a solid financial position."


Gochnauer commented that business customers are reacting to the current economic turbulence by reducing spending and cutting jobs, and that this culture of cutting back is hitting sales.


"Q1 revenues to date are down about 8 percent, and we expect the market to remain difficult throughout 2009," said Gochnauer. "We have responded by accelerating cost reductions and adjusting staffing levels."
Gochnauer said that United "will continue to make adjustments," possibly indicating the loss of more jobs.


…SP Richards’ sales down 2%


US conglomerate Genuine Parts Company has announced that its OP unit, SP Richards, has recorded 2008 net sales of $1.73 billion, down from $1.76 billion in 2007.


SP Richards’ operating profit for the year fell to $144 million from $156 million in the year ago period. In the three months to end-December the OP unit witnessed net sales fall sharply to $400 million from $422 million, as operating profit dropped to $29.4 million from $37.7 million.


Discussing SP Richards on the Genuine Parts Company earnings call, Tom Gallagher President/Chief Executive Officer said the unit experienced sales difficulty all through the year. "Our office group reported a 2 percent decrease for the year. (After the industry slowdown in 2007) we felt that we were starting to see modest signs of the business conditions firming up in Q2 and Q3, but then the high level of white collar job reductions in final months of the year caused OP demand to drop off."


However, growth in the reseller category increased 2 percent in the final quarter and 1 percent for the year. Gallagher said that 75-80 percent of SP Richards’ business was with independents; while 20-25 percent was with big box resellers and that he did not see that changing over time.


Gallagher said that independent dealers are "holding up reasonably well" and that for the last two years SP Richards’ growth on the independent side hasd been a "little stronger" than its with ‘megas’. He said that SP Richards would work with big and small resellers, but that he felt dealers are "not as impacted as the negatives in certain customer categories, because they’re not the ones that deal with the large firms that have had the most massive contraction in office workers…In prior cycles we actually saw the independents contract more than we saw the ‘megas’, and I think this one is different."


Gallagher said the year had been "challenging" and that he expected 2008 to be the same. However, he added SP Richards would be well positioned for next year as it focused on initiatives including product line expansion and enhanced marketing and online projects.


Australian OFIS dream is over


Australia’s Harvey Norman is shutting down its OP superstore chain less than 12 months after it launched.
The company says that Ofis had not performed as expected since its launch last April and that it does not expect the brand to achieve the requirement for ongoing investment. The five existing Ofis stores will now be closed during the middle of the year. The closure will represent a pre-tax profit loss of A$7-8 million ($4.5-5.2 million).


Harvey Norman’s chairman Gerry Harvey told the press towards the end of last year that he wanted Ofis to take 20-25 percent of the market in Australia. He conceded it would take "between 10 and 20 years to do". However less than a year after its launch and amid turbulent economic conditions, Ofis has failed to challenge leading OP superstore chain Officeworks’ 15-year grip on the sector.


Meanwhile Australian retail group Wesfarmers has announced its Officeworks retail unit recorded revenues of A$602 million ($390.8 million) for the six months to December 31, while EBITDA hit A$34 million and EBIT A$25 million.


Wesfarmers said Christmas trading for the unit was positive, but that there was "significant pressures" on its margins from aggressive price competition. Headline growth across the retail chain was 3.9 percent.
Wesfarmers said this was "pleasing given the level of change that has been required in the business since acquisition, and the adverse market conditions for small to medium size businesses."


Smith’s drops Playboy


Uk High Street retailer WH Smith is to pull its Playboy range of stationery after complaints that it was not suitable for sale to children.


The discontinuation of the Playboy line comes after the Consumer Focus Campaign Chief Executive Ed Mayo criticised WH Smith for selling it in his book, Consumer Kids.


He and co-author Agnes Nairn argue that young girls are being "sexualised" well before puberty and adds it is welcome news that Smith’s has withdrawn, for commercial or ethical reasons, a range that "normalises" pornography.


WH Smith says it renews its range of fashion stationery each spring and has chosen to discontinue the Playboy range as part of this update. Stores are now selling existing stock.


Last May a priest in York, UK, forced a Stationery Box store to withdraw Playboy branded stationery after he complained that the products were located next to items intended for children.


Father Tim Jones noticed the Playboy products located next to Winnie the Pooh and Disney products while he was in the store with his seven-year-old daughter. After complaining to the store manager, they agreed to remove the offending articles while it conducted a merchandising review.


Playboy said that it was surprised at the "inappropriate" product placement and that its products were targeted at adults in the 18-34 age range.


Circuit City brand could survive


Hilco is attempting to acquire the Circuit City brand name and website, according to media reports.
The US retail consulting and liquidation company liquidated 154 Circuit City stores last year. However, Hilco has not said what it plans to do with the Circuit City name if it acquires it. A federal bankruptcy court judge would have to approve any sale of the name.


As it currently exists Circuit City would still disappear even if its name is sold. But a new buyer could use the name as it wants. Circuit City’s last US stores will close in March.


Mergers and Acquisitions


Xerox has acquired a major Ohio-based office equipment dealer via its Global Imaging subsidiary.
The deal which sees Global Imaging acquiring employee-owned dealer ComDoc is expected to be finalised by the end of March. ComDoc has annual sales of around $125 million, employs 640 staff and has offices in four states. The deal adds 14,000 potential new customers for Xerox as the company continues to take over regional dealers following its acquisition of Global Imaging in 2007.
Norwalk (CT), USA


ACCO has sold its former GBC commercial laminating business to Indian firm Cosmo films, a $140 million manufacturer of BOPP (biaxially oriented polypropylene) and thermal lamination films based in New Delhi. ACCO had been looking to divest is Commerical Print Finishing unit for some time.
New Delhi, India


BIC is to acquire a 40 percent stake in Indian writing instruments manufacturer and distributor Cello Pens. BIC will pay 3121 million ($161 million) for the stake, with an option in 2013 to increase its shareholding to 55 percent at a price tied to earnings. The deal is to be funded largely through debt and BIC says that it expects it to achieve profitability in 2009. According to a BIC company statement, Cello Pens is the largest writing instruments manufacturer in India with a market share of 37 percent, with a presence in Africa, the Middle East and Asia.


Last year Cello Pens had sales of almost €65 million and EBIT margin of around 30 percent.
Paris, France