Date post: | 15-May-2015 |
Category: |
Business |
Upload: | catherine-klasne-mba |
View: | 3,875 times |
Download: | 3 times |
Tyler Kerner, Catherine Klasne,Tony Padilla
1
OFFICE DEPOT:ANALYSIS AND
EVALUATION
Off and running in 1986
2
A HISTORY OF OFFICE DEPOT
The first three were opened in 1986.
OFFICE DEPOT’S GROWTH IN NUMBER OF STORES
Office Depot - 1986 Office Depot Inc., was founded in 1986 in Florida by Pat Sher, Jack Kopkin and Stephen Dougherty Opened first store in Fort Lauderdale in October Opened two more stores by year’s end
Recorded sales of $2 million
OFFICE DEPOT IN 1987
Appointed David I. Fuente Chairman and Chief Executive Officer
Sales of $34 million 10 stores in Florida and Georgia
800 employees
OFFICE DEPOT - LATE ’80S
1988Initial public offering of common stock completed on June 1, 1988. Listed on the NASDAQ under the symbol "ODEP.“ Employee Stock Option Plan adopted. Sales of $132 million 26 stores in seven states; 1,600 employees.
1989Sales of $315 million 67 stores in 12 states 3,500 employees
OFFICE DEPOT - 1990
Merged with Office Club, Inc., on December 20
Introduced Office Depot private label credit card
Opened 100th store in September Began selling personal computers and
peripherals Introduced extensive line of recycled
paper products, initiating company's environmental focus
Opened first delivery center Sales of $626 million 5,600 employees as of February 28
OFFICE DEPOT - 1993
Entered the contract stationer business via the acquisition of Wilson Stationery & Printing Co. and Eastman Office Products Corp.
Miami Herald names Office Depot the Company of the Year in April
Adopted corporate social responsibility program
Established Office Depot Foundation to assist employees and members of the community at large in times of extreme hardship
Sales of $2.6 billion 351 stores in North America 20,000 employees
OFFICE DEPOT - 1994
Acquired six additional contract stationers in North America
Went international by opening licensed Office Depot stores in Israel and Colombia
Announced retail joint venture agreement in Mexico and licensing agreement in Poland
Launched sports and event marketing programs around the country
Raised more than $1 million for its charitiesSales of $4.3 billion 420 stores in North America 26,000 employees
OFFICE DEPOT - 1995
500th store opened in North America Opened stores in Mexico and Poland International expansion in France and
Thailand Established Office Depot's Business Services
Division Introduced Arnold Palmer as the Company's
spokesperson Introduced a Regional Vendor Diversity
Initiative Sales of $5.3 billion 30,000 employees
OFFICE DEPOT - MID-’90S
1996Pioneered its first B2B e-commerce site Sales of $6 billion 570 stores in North America; 31,000 employees
1997Opened 21 new foreign locations, ending year with 45 international locations in eight countries, excluding Canada Designed the first public website to offer the convenience of "point and click" for office supplies needs Dilbert TM introduced as new print and broadcasting icon – online, tooSales of $6.7 billion 602 stores in North America; 35,000 employees
OFFICE DEPOT AND DILBERT
OFFICE DEPOT - 1998
Merged with Viking Office Products, direct marketer in Europe and Australia
By end of year, owned and operated 15 stores in France and had 72 Office Depot locations in Colombia, Hungary, Israel, Japan, Mexico, Poland and Thailand through joint venture or international licensing agreements
Over $1 billion in international sales Over 100 new store openings in North America, highest in
the company's history North American Retail stores sales exceed $5 billion Launched public website officedepot.com in January E-commerce sales totaled $66.5 million Sales of nearly $9 billion (8.99) 702 stores in North America 44,000 employees
OFFICE DEPOT - 1999
Sales exceed $10 billion, first in office supply industry to reach this milestone
Office Depot is included S&P 500 listing in June
Internet Retailer . Office Depot ranked "Top 25 of the Web"
Fortune Magazine . Office Depot named as one of "10 Companies that Get It"
Sales of $10.3 billion 825 stores in North America 48,000 employees
OFFICE DEPOT - EARLY 2000S
2000Appointed Bruce Nelson CEO Adopted strong commitment to corporate values of Respect for the Individual, Fanatical Customer Service and Excellence in Execution. Sales of $11.6 billion; 888 stores in N. America; 48,000 employees
2001Acquired 4Sure.com$1.6 billion in worldwide e-commerce sales Inaugurated National Backpack Program for underprivileged children Sales of $11.2 billion; 859 stores in North America; 45,000 employees
OFFICE DEPOT - 2002
$2.1 billion in worldwide e-commerce sales Expanded into Central America with new retail
stores in Guatemala and Costa Rico through a joint licensing agreement
Sponsorship of 2002 and 2004 U.S. Olympic Team announced
Won naming rights for the sports and entertainment center in Sunrise, FL. Office Depot Center became the official home of the NHL Florida Panthers
Sales of $11.4 billion 861 Stores in North America 43,000 employees
OFFICE DEPOT - 2003
Acquired Guilbert S. A., a leading contract stationer, doubling the size of the company's European business
First office supply superstore to offer fully-functional and comprehensive Spanish website
Number two global online retailer with sales of $2.6 billion
Implemented Ink and Toner Recycling program in stores nationwide; introduced "Green Book" Catalog
BusinessWeek magazine listed Office Depot among the top corporate philanthropists in the U.S.
Sales of $12.4 billion 900 stores in North America 46,000 employees
OFFICE DEPOT - 2004
Appointed Neil Austrian interim Chairman and CEO
Launched first free, nationwide in-store electronics recycling program and free, in-store cell phone and rechargeable battery recycling program in the U.S. and Canada
State of Florida, Office of Supplier Diversity- Corporation of the Year.
Powered 20 retail stores with renewable "Green Power" to reduce greenhouse gas emissions
Listed on Companies That Care Honor Roll Sales of $13.6 billion 969 stores in North America 47,000 employees
OFFICE DEPOT - 2005
Steve Odland appointed Chairman and CEO Named Official Office Products Partner of
NASCAR; sponsored the No. 99 Office Depot Roush Racing Car
Relaunched the Taking Care ofBusiness tagline
Opened 1,000th store Listed on Companies That
Care Honor Roll Sales of $14.3 billion
OFFICE DEPOT - MID-2000S
2006Announced $4.5 million in contributions to higher education Sales of $15 billion; 1,158 stores; 50,000 employees
2007Opened first store in Puerto Rico Opened new Global Sourcing Office in Shenzhen, China Named to the EPA's list of the Top 10 Retail Partners in the Green Power Partnership Sales of $15 billion; 1,222 stores; 50,000 employees
OFFICE DEPOT - 2008
Introduced "Office Depot Green" product line Launched Office Depot Tech Trade-In Program Announced alliance with Netbizz Office Supplies in
Singapore Formed partnership with AGE in Sweden Established alliance with bigboXX.com in Hong
Kong Opened new facilities in Großostheim (Germany)
and Zwolle (The Netherlands) 1,267 storesAlmost $15 billion in salesMore than 51,000 Employees
OFFICE DEPOT - 2009
Opened first retail store in Kuwait Celebrated first season as sponsor of Tony
Stewart, driver of the No. 14 Office Depot/Old Spice Chevrolet Impala SS in the NASCAR Sprint Cup Series™
Expanded line of digital cameras, writing instruments and specialty papers
Announced new assortments of teaching products and plastic storage solutions
1,152 stores, over $12 billionin sales; more than 41,000 employees
OFFICE DEPOT STORE COUNT
GROWTH IN OFFICE DEPOT’S RANKS
OFFICE DEPOT SALES HISTORY
OFFICE DEPOT - STOCK PRICE HISTORY
OFFICE DEPOT - STOCK PRICE 2010
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
OFFICE DEPOT - CURRENT STOCK PRICE
• OPD - $4.95• Average volume over 6 million
shares per day• 52-week range: 3.36 – 9.19
Office Supply Sector
29
ANALYSIS OF THE INDUSTRY
The market structure in which the firm operates: An oligopoly of large international retail-chain businesses that offer:
general office suppliestechnology productsoffice furnitureand services
to the public through its retail storesto other businesses through one or more divisionsand, in some cases, to schools.
30
MARKET STRUCTURE
Office Depot competitor and industry leader Staples, Inc., places itself among 21 peers – which it reviews every three years. They are retailers with which the company competes for customers or executives. 31
THE LARGER UNIVERSE
Similarly, OfficeMax illustrates its relationship with other office supply superstores and other retailers, which their investor report calls “niche players.” 32
MAJOR COMPETITORS ARE OBVIOUS IN THIS GRAPHIC.
This slide, part of a 2010 Office Depot shareholder presentation, shows how the Office Supply Sector fits into the overall U.S. office supplies market.
33
ODP: OFFICE DEPOTSPLS: STAPLESOMX: OFFICE MAX
The valuation of the office products industry at $309 billion, based on revenues, came the year the overall economy was slipping into a recession.
34
CAGR: COMPOUND ANNUAL GROWTH RATE
Not surprisingly, OfficeMax relates industry sales during the recession to the employment of office workers.
35
THEY TOOK A HARDER HIT THAN WORKERS OVERALL.
Competitor OfficeMax also sees an opportunity for industry growth during recovery by expanding office supply sales internationally, an area that is increasingly being explored by Office Depot.
36
ALTHOUGH THE BIG THREE ARE LOOKING TO THE WORLD AT LARGE FOR OPPOR-TUNITIES, THEIR PUBLIC FACE REMAINS THEIR DOMESTIC SUPER-STORES.
Office Depot: 1,330 (144 in Florida)Staples: 1,555 (97 in Florida)OfficeMax: 933 (55 in Florida) 37
NUMBER OF STORES IN THE U.S.
A merger between Office Depot and Staples was denied by the FTC in 1997 because, it said, the HHI value would exceed 5000 in 42 metropolitan areas for office supply superstores after the merger.
The U.S. Justice Department considers a value over 1800 for any industry to indicate their market is highly concentrated.
Overall, we estimate the HHI for office supply superstores to be about 4300 and calculate the individual scores of the big three to be:
38
HERFINDAHL-HIRSCHMAN INDEX
39
HERFINDAHL-HIRSCHMAN INDEX
Exploring direct sourcing
40
UNIQUE CHARACTERISTICS
OF SUPPLY:
In its own 2009 annual report, Office Depot mentions it is expanding the categories of products it sources and countries it utilizes.
41
UNIQUE CHARACTERISTICS OF SUPPLY
One “initiative to increase profitability involves direct sourcing, whereby retailers purchase goods directly from suppliers and cut out any middlemen. … Office Depot and Staples are very competitive in this regard, with about one-fifth of all goods sold coming from respective private labels.”
-- wikinvest.com
3 Words: Back to School
42
SEASONALITY OF SALES
43
2010: SLIGHT RECOVERY
“Promotions played a significant role in the marketing of OP suppliers. And although results were a little mixed during the bid to drive early traffic in July, promotions did play their part in the strong September.”-- OPI Magazine
44
AS BTS GOES, SO GOES THE YEAR
The intense competition from other retailers in areas such as electronics makes this traditionally busy time second to BTS.
45
HOLIDAY SEASON
Sales & profits, demand factors, investor analysis
46
OFFICE DEPOT: FINANCIAL ASPECTS
Historical & Current
47
SALES & PROFITS
SALES HISTORY
Strong historical revenue growth until recent downturn in economic conditions
Revenue (Year-over-Year)
Total company sales of $2.9 billion decreased 4% vs Q3 2009
Year over year sales change improving in recent quarters
Profit (Year-over-Year)
Fifth consecutive quarter of year-over-year margin improvement
SALES & PROFIT ANALYSIS
Strategic Initiatives Offering exciting new assortment in technology
Increasing brand awareness using direct mail and
broadcast media
Nationwide rollout of U.S. Postal Service offerings
in retail stores
Increased marketing of Copy and Print Depot and
Tech Depot services
New point-of-sale system to provide customer
recognition, including Worklife Rewards Members
Integrating marketing efforts with BSD’s Direct
business to reach small business
NORTH AMERICAN RETAIL DIVISION
Strategic Initiatives Implementation of large market business
development teams Stronger focus on National Account business
development Continued focus on growth in the small-to
medium-sized business customer space Continued growth in the Federal Government
sector Adding sales resources in the area of
cleaning and break room supplies Continuing growth and increasing
momentum in Copy and Print business Launching new marketing programs and
loyalty programs
NORTH AMERICAN BUSINESS SOLUTIONS
Strategic Initiatives Focused on winning new customers by refining
business model to become more customer centric,
with better segmentation, refined and coordinated
contacts, refreshed branding, improved pricing and
more robust e-commerce tools
Replacing analog equipment with voice over IP
digital telephony in all our major European markets.
This will allow automated call distribution solutions
to route incoming service requests to the first
available agent with the appropriate skill set
Increasing Office Depot’s global reach and
capitalizing on market opportunities
INTERNATIONAL DIVISION
Economic Indicators & Cost-Cutting Measures
53
DEMAND FACTORS& IMPACTS
Macro Economic Indicators
DEMAND DRIVERS
• North American Retail and Business Solutions
• Office Depot’s U.S. business tracks closely with a number of macro economic metrics
• International demand drivers• Impacts of foreign exchange translation
ELASTICITY
Office Depot elasticity is theorized to be >1.
There are many competitors Easy for buyer to go elsewhereEase of entry into the marketplace
Capital Spending 2010 capital expenditures will be allocated in
order to fund ongoing maintenance and other investments needed to drive strategic plan and improve return on investment
Created a Business Process Improvement (BPI) Organization Currently identified $80 million of cost savings
opportunities from indirect spend reductions, finance process improvements and IT integration
Identified working capital reduction opportunities of about $50 million
Targeting a $100 million cost savings annual run rate by late 2013
Supply chain initiative Automated order fulfillment is more productive,
accurate and flexible than other warehouse automation
COST CUTTING EFFORTS
Sales Mirror Economic Recovery
57
INVESTOR ANALYSIS
INVESTOR OUTLOOK
58
Investor Projections Expect sales to rise 1.3% in 2011, following a projection of a 3.9% decline in 2010 Project a slight widening of gross margins in 2011, reflecting inventory optimization
and increased private label sales, slightly offset by a product mix shift to lower-margin goods
We think the loss of market share and macrorelated challenges have created an overhang of uncertainty, as has the recent departure of the firm's chairman and CEO
INVESTOR OUTLOOK