Office depot red
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This is my team's PowerPoint presentation on Office Depot for Economic Analysis of the Firm. We disagreed on the level of success the company will have as we all emerge from the recession.
![[object Object],A HISTORY OF OFFICE DEPOT](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Office depot red
- 1. Tyler Kerner, Catherine Klasne, Tony Padilla OFFICE DEPOT: ANALYSIS AND EVALUATION
- 11. OFFICE DEPOT AND DILBERT
- 22. OFFICE DEPOT STORE COUNT
- 23. GROWTH IN OFFICE DEPOT’S RANKS
- 24. OFFICE DEPOT SALES HISTORY
- 25. OFFICE DEPOT - STOCK PRICE HISTORY
- 26. OFFICE DEPOT - STOCK PRICE 2010
- 27. OFFICE DEPOT - STOCK SPLITS May-92 2: 1 Stock Split June-93 3: 2 Stock Split June-94 3: 2 Stock Split April-99 3: 2 Stock Split
- 48. SALES HISTORY Strong historical revenue growth until recent downturn in economic conditions
- 58. INVESTOR OUTLOOK
Editor's Notes
- 122 stores in 19 states
- Junior Achievement, the Leukemia Society of America and the March of Dimes
- 10th Anniversary Announced plans to open the first Office Depot stores in Japan
- providing free backpacks filled with school supplies
- on the basis of its in-kind donations
- Celebrated 20th anniversary in 2006
- I’ll be covering Office Depot’s major competitors at the same time as describing the industry in which it operates.
- “ The U.S. office products market is the largest in the world,” says OPI.net, the website of Office Products International (OPI), which was formed in 1991 by two former British dealers to report on global issues affecting the office supplies sector. “From this position of strength, it often leads the way with innovations and industry developments. The superstore started here along with many other industry changing trends.”
- Industry leader Staples, Inc., includes Office Depot and Office Max, Inc., on a list of 20 peers. None of the other companies on the list is in the office supply sector. When the group was reviewed in mid-2008, “peer company candidates were selected from a universe of 345 potential companies and analyzed using various metrics related to business model, revenue, market capitalization, global reach, brand recognition and whether we compete for executive talent or customers.”
- The three do not necessarily price to match Walmart or even Target, but we can all see they price competitively with each other. That being the case, the three companies (commonly identified as the office supply sector) account for only a small portion of the nation’s overall sales of office supplies. Office Depot estimates the superstore companies comprise just 9.7 percent of the overall U.S. office supplies market. “The rest of the market is divided widely between supermarkets, wholesale retailers, discount stores (including Walmart) and smaller independent companies” (Office Depot, Inc., 2010).
- For most items, you can go to a Walmart or even a drugstore, but I challenge you, if you’re looking for a specialty item, to find it somewhere but an Office Depot, Staples or OfficeMax. I was recently looking for a mailing envelope for a thick sheaf of legal-size documents, I started off at Walgreens, then Walmart and Target and it was no-go. Tried at Office Depot and found a bubble-wrap-style mailer; then I went to Staples and found the same thing for the same price. If you have a special ink you need for your printer and you forget to order it online, you’re going to wind up at an office-supply big box.
- What you’re seeing here in green and red is total revenue or sales and how the recession knocked them back in 2008. I had to look up CAGR, and it is just a performance metric, but it’s a little different from what we’ve discussed in Dr. Allen’s class. I would bet we’ll get more into that in our finance class.
- Hoover’s industry indicator is U.S. corporate profits. They jumped 37 percent in the second quarter of 2010 compared to the same period in 2009, and they’re an indicator of corporate demand for office and paper supplies.
- Both OfficeMax and Office Depot see international sales as one of their few opportunities for growth. A website called wikinvest says that “One clear advantage Office Depot holds over Staples is in the international market, where Office Depot is clearly ahead in terms of sales and operating margins. This lead in the international regions may also help buffer Office Depot's business in the case of an economic downturn in North America.”
- We’re limiting our discussion to the U.S. big three, accounting for about $378 million of the $3.9 billion market. Sector leader Staples also leads in the number of U.S. locations, although not as dramatically as might be expected, with 1,555 in the continental United States. Office Depot is second with 1,330, including two in Alaska, four in Hawaii, and six in Puerto Rico. OfficeMax’s 933 superstores are the farthest flung and include three in Alaska, eight in Hawaii, 13 in Puerto Rico, and two in the U.S. Virgin Islands (OfficeMax, Inc., 2010). The stores are concentrated in the Sunbelt of Florida, Texas and California.
- Here, we just see a bit of the rationale we used in calculating the HHI. Our approach is supported by a 13-year-old action of the Federal Trade Commission. The FTC, based on Justice Department analysis, denied a merger between Office Depot and Staples because, it said, the HHI value would exceed 5000 in 42 metropolitan areas for the merged office supply superstore companies.
- Here are the details. Current market share for Office Depot is less than half of that for Staples, and Office Max has just about two-thirds of the market share of Office Depot. The challenge for Office Depot and its two major competitors is to gain market share within the sector and within the overall industry.
- Office Depot and its rivals consistently provide “household-brand” products in their big-box stores from companies such as Hewlett-Packard, Canon, Brother, Pilot, Sanford, 3M and Bic. Like many retailers, it purchases these products from distributors and resells them. All three also package their own brands of such popular items as ink, toner and paper.
- Direct sourcing allows companies such as Office Depot to offer its own line of private label goods, which typically see higher margins than branded goods.
- Like the rest of the sector, Office Depot concentrates heavily on back-to-school retail. Office Depot told its investors it was pleased with this year’s back-to-school performanceI guarantee the other two have made similar statements. For the sector overall, U.S. sales during the three-month period from July through September increased by 2 percent over 2009 sales for the same period, “pretty consistent with overall retail trends in the U.S.” (Office Products International, 2010).
- Biggest problem seems to be not knowing exactly when to expect the purchasing push. During the recession, consumers have been buying BTS supplies as late as possible.
- Also, around 17 percent of the U.S. population are unemployed or under-employed, so there is a large percentage of consumers who are living paycheck to paycheck and have little impetus to make purchases ahead of the time the items are needed.
- The holiday retail season is only second to Back to School, but marketers still give it a try. This is a well-known holiday campaign from OfficeMax that’s back this year.
- 12.1 billion in sales in 2009, down 18% compared to 2008 About the same decrease year over year for each of the three divisions Revenue growth attributed to M&A’s. joint ventures and licensing agreements
- Revenue and profit year over year trends, show some bright signs The decline in sales quarter over quarter is improving Comparing 2009 vs 2010, profit margin has improved for 5 straight quarters
- - Go over breakdown of performance for each of the three divisions, and their strategic initiatives moving forward Largest concentration of stores in Florida, California and Texas. Sales through chain stores Revenue down 1%, Profit down $5M compared to last year Closed 120 underperforming stores in 2008 and 2009 Strong back to school season for this division Focus ad expenditure on brand awareness to differentiate offering from competitors Point of sales system improve efficiency and give a unique advantage to loyal customers Streamlining marketing efforts with other divisions, to leverage similarities and reduce cost
- 3Q10 Sales down 4%, and profit increase of 4M compared to 2009 Profit increase due to higher sales mix and improved productivity in sales expense Sells nationaly branded and private branded office supplies through e-sites and catalogues Dedicated websites for contract customers Direct contracts with state and local government contracts, school districts and not for profit organizations Largest opportunities lie in North America for large contracts. Consolidating efforts in many areas with other divisions where there are synergies to become more efficient
- Sales down 10%, and profit down to $30M, driven exchange rate and volume decreases Sold to customers in 51 countries, managed through regional headquarters. Expand the reach through joint ventures, licensing and franchising agreements Retail operations closed in Japan in 2009 Closed deal to acquire Carvajal International business to business in Mexico and CAM Major factor to become more price competitive and efficient in international markets
- Reduce consumer confidence impact discretionary spending of consumers, which impacts office supplies Small business spending on office supplies decrease with low levels on the optimism index Overall, with the poor economic conditions, the retail sector has been extremely impacted
- Store closures as mentioned before, and reducing store foot prints based on demand needs in the area Becoming more automated and efficient across various business workflows and streams to reduce cost Simplify, consolidate and globalize IT systems. Implement same ERP systems
- 5 year stock price trend shows negative sloping Went from a high of 46.52 to a low of .590
- Overall, outlook not good from various investment analyst firms. Many have the stock on a SELL or HOLD rating Concerned about ODP becoming very selective when signing accounts in an effort to become more profitable