QUOTE AND NEWS
TheStreet.com  Sep 20  Comment 
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. NEW YORK (TheStreet) -- Here are some of the hot stocks Jim Cramer talked about on Friday's Mad Money on CNBC: AZO data by...
Motley Fool  Sep 17  Comment 
Shares of Staples have declined during the past few years, and there a few reasons that could lead to further declines during the next few years.
Benzinga  Sep 15  Comment 
Morgan Stanley analyst Simeon Gutman recently visited the stores of Best Buy Co Inc (NYSE: BBY), Target Corporation (NYSE: TGT), PetSmart, Inc. (NASDAQ: PETM), Vitamin Shoppe Inc (NYSE: VSI) and Office Depot Inc (NYSE: ODP). The individual...
Wall Street Journal  Sep 15  Comment 
Office Depot Inc. said it will transfer its stock listing to the Nasdaq Global Select Market from the New York Stock Exchange later this month.
TheStreet.com  Sep 15  Comment 
By Pete Najarian ofaOptionMonster NEW YORK -- There's been talk of a possible merger between Staples and Office Depot for weeks, and the bulls are placing bets on both. As I mentioned on CNBC's "Halftime Report" and "Fast Money" on Friday,...
Clusterstock  Sep 12  Comment 
Activist investor Jeff Smith, who runs hedge fund Starboard Value, wants to to make a change to Olive Garden's famous unlimited breadsticks and salad. Smith's fund owns an 8.8% in the restaurant group's stock. It's his contention that by...
StreetInsider.com  Sep 10  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Management+Changes/Office+Depot+%28ODP%29+Director+Smith+Resigns/9820764.html for the full story.
CNNMoney.com  Sep 3  Comment 
Shares of Staples and Office Depot soared after an analyst said the two should merge. But a combined company would still lose out to Amazon.
SeekingAlpha  Sep 3  Comment 
By Jeffrey Himelson: Today, Office Depot (NYSE:ODP) spiked more than 6% after the release of a report by Credit Suisse expecting it to be acquired by Staples (NASDAQ:SPLS). In the report Credit Suisse increased its target price on Staples to $15...
newratings.com  Sep 3  Comment 
WASHINGTON (dpa-AFX) - Office Depot, Inc. (ODP), a provider of office products, services, and solutions, Wednesday said as part of its participation today at the Goldman Sachs 21st Annual Global Retailing Conference in New York City, it plans to...




 

Office Depot (NYSE: ODP) is one of the largest office suppliers in the United States, with over $12.1 billion in office products sold in 2009.[1] Combined with Staples (SPLS) and Officemax (OMX), these three companies supply approximately 10% of the world's office supplies.

Office Depot has made efforts to increase its profitability by offering copy and print services, which enjoy margins twice as high as its other offerings. The company has integrated copy and print services into retail and commercial businesses, going so far as to extensively renovate its retail stores with copy centers prominently featured in the front. In addition, Office Depot built a network of 12 regional centers for large commercial clients.

A second initiative to increase profitability involves direct sourcing, whereby retailers purchase goods directly from suppliers and cut out any middlemen. 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. Office Depot and Staples are very competitive in this regard, with about one-fifth of all goods sold coming from respective private labels.

Company Overview

In 2009, Office Depot's total revenues were $12.1 billion, a 16% decline from its 2008 revenue.[2] The company attributed this decline to the tough economic conditions in the United States for 2009. As a result, Office Depot posted a net loss of $599 million in 2009, compared to its net loss of $1.48 billion in 2008.

Business Segments

Office Depot breaks its business into three reportable segments: i) North American Retail, ii) North American Business Solutions, and iii) International.

North American Retail

Office Depot's retail stores in North America sell office supplies, computers and software, office furniture and other business-related products. Many of Office Depot's retail stores also have copy centers which design, print and ship various materials such as training manuals, newsletters and marketing materials. Retail stores mostly serve consumers and small businesses. For 2009, Office Depot's North American Retail segment had total sales of $5.1 billion and posted an operating profit of $105.5 million.[2]

North American Business Solutions

In addition to operating retail stores throughout North America, Office Depot also provides office supplies directly to medium and large sized businesses. Office Depot serves these businesses via field sales agents, catalogs, and Office Depot's website. In 2009, North American Business Solutions sales were $3.48 billion, with an operating income of $98 million.[3]

International

Office Depot operates retail stores in foreign countries and sells directly to businesses on an international level. In the international retail segment, Office Depot operates a mix of company owned stores, joint ventures, franchised stores and other retailing arrangements. In the international business solutions segment, Office Depot sells office supplies to business through catalogs, websites and field sales agents. For the year ended 2009, Office Depot's International segment had total sales of $3.5 billion and an operating income of $120 million.[4]

Trends and Forces

Direct Sourcing

Office Depot currently directly sources approximately 5% of its merchandise, including both brand name and private-label goods. Direct sourcing is a method that wholesale retailers have been adopting more readily across the retail industry, whereby retailers purchase goods directly from manufacturers rather than through a transferring agent or "middleman".

Direct sourcing creates considerably higher margins for retailers such as Office Depot by eliminating "middleman" costs. It is estimated that for every 1% increase in sales that is directly sourced, Office Depot would see a 0.1% increase in operating margins.

Copy Centers

Most North American retail outlets have copy centers that provide designing and printing services to consumers and businesses. The overall copy center market is estimated at about $20 billion annually, and the industry is broken up among several key constituents:

  • Small local and regional companies accounting for approximately 75% of the market by revenue
  • The major office supply retailers (Staples, Office Depot and OfficeMax) comprise about 11% of the market combined
  • FedEx (FDX) subsidiary Kinko's owns the leading share of the market at 14% of revenues

In this highly divided market, there is room for Office Depot to take away market share not only from its main competitors, Staples and OfficeMax, but the copy center leader, FedEx Kinko's. In addition to copy centers based in retail stores, Office Depot has 12 regional production facilities that provide the same services for large-scale orders.

Current estimates for the operating margin of Office Depot's design, print and ship services are approximately 17%, ranking it as one of Office Depot's most profitable offerings. Office Depot has leveraged this profit center by renovating retail stores to make copy centers more visible to customers near the front of the store.

International Advantage

Despite being second to Staples in total sales and profits, Office Depot had greater total sales and a higher operating margin in the international segment than leading competitor Staples. Part of this advantage comes from Office Depot's split of retail and business solution sales in the international division. Office Depot is pressing their advantage at operating business solution sales in the international segment by acquiring contract office suppliers across the globe in profitable markets such as Asia and South America.

Competition

Office Depot, combined with Staples (SPLS) and Officemax (OMX), are the market leaders in the office supply industry. However, together they account for about only 10% of the estimated $300 billion market. The rest of the market is divided widely between supermarkets, wholesale retailers, discount stores (including Wal-Mart) and smaller independent companies.

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.



References

  1. ODP 10-K 2009 Item 1 Pg. 1
  2. 2.0 2.1 ODP 10-K 2009 Item 7 Pg. 24
  3. ODP 10-K 2009 Item 7 Pg. 25
  4. ODP 10-K 2009 Item 7 Pg. 26
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki