Office Depot (ODP) Banks on Strategic Initiatives for Growth
Office Depot, Inc. ODP has undertaken a strategic review of business operating model, growth prospects and cost structure to bring itself back on the growth trajectory.
The company is closing underperforming stores, reducing exposure to higher dollar-value inventory items, shuttering non-critical distribution facilities, concentrating on e-Commerce platforms as well as focusing on providing innovative products and services. The company intends to boost sales in the contract channel by increasing its penetration into adjacent categories and enhancing wallet share with existing customers.
With respect to the cost-containment effort, Office Depot is employing a more efficient customer coverage model, focusing on bringing down indirect procurement costs and general and administrative expenditures, as well as gaining from its U.S. retail store optimization plan. Management expects these endeavors to result in annual benefits of over $250 million by the end of 2018. Moreover, Office Depot reiterated annual run-rate merger synergy benefits in excess of $750 million from the OfficeMax integration, which is likely to be concluded by the end of next year. The cost savings, together with synergy benefits in excess of $750 million, will amount to total annual savings of approximately $1 billion by the end of 2018.
The company remains focused on optimal store site in order to augment store productivity. It plans to concentrate more on improving sales per square foot through a rise in customer traffic and by converting them into potential buyers through targeted advertising, ongoing sales training and customer-oriented initiatives. The company provides assistance to customers with respect to PC maintenance, removal of viruses, and others.
OFFICE DEPOT Price and Consensus
OFFICE DEPOT Price and Consensus | OFFICE DEPOT Quote
Office Depot, which shares space with Staples, Inc. SPLS and Barnes & Noble, Inc. BKS, announced these strategic initiatives after the company’s second-quarter 2016 earnings and revenue missed the Zacks Consensus Estimate for the fourth and eighth straight quarter, respectively, and declined year-over-year. Persistent weakness in the office products sector, technological advancements and stiff competition from online retailers such as Amazon.com, Inc. AMZN are weighing upon the company’s performance. Management expects total sales to be lower in 2016 in comparison with 2015 on account of store closures, business disruption owing to merger-related issues and tough market conditions.
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