Office Depot on Tuesday announced an executive shakeup as it focuses its strategy on its North American operations, after its planned merger with rival Staples last year collapsed. Executive Vice President Steve Calkins, who joined the company in 2003 and oversees contract sales and Canadian sales, among other responsibilities, is now president of the company's Business Solutions Division, focused on B2B customers, according to a company press release.
Troy Rice, at the office supplies retailer since 2014 and previously executive vice president and chief operating officer there, has been named president of the Retail Division, focusing on B2C customers and the Copy and Print business. Prior to joining Office Depot, he had executive leadership roles at Toys “R” Us and The Home Depot.
Michael Allison, who has been at the retailer since 2006, recently took the new role of executive vice president and chief administrative officer, overseeing human resources, communications, loss prevention and events, and added responsibilities for IT, real estate and construction. Senior Vice President of E-commerce Kevin Moffitt (at Office Depot since 2012) will also assume the expanded role of chief digital officer, overseeing all digital-related activities. John Gannfors, who joined recently from Lenovo, will serve as executive vice president leading the company’s transformation office, process improvement and strategic sourcing.
Gerry Smith arrived at Office Depot as CEO in February and now his team is shaping up, as the retailer continues to figure out how to go it alone in the office supplies space. The retailer earlier this month reported first quarter results that beat expectations as it managed to rein in costs and profited from the sale of some stores.
Q1 adjusted operating income was $151 million, up from $124 million in the year-ago quarter. Q1 adjusted net income from continuing operations was $88 million, or 16 cents per share, up from 12 cents per share in the year-ago quarter and beating beat average estimates from Thomson Reuters I/B/E/S analysts, cited by Reuters, for 12 cents per share.
Retail sales remain muted however: Q1 retail division sales in North America were $1.4 billion, down from $1.5 billion in the prior-year period, due to the impact of planned store closures over the past twelve months, lower store traffic and a 5% decline in same-store sales. Overall net sales in the quarter fell to $2.68 billion from $2.88 billion, largely due to the loss of business through shuttered stores and the loss of its overseas business, which it sold off last year.
Following the failed merger with rival Staples, which was thwarted last spring by the Federal Trade Commission, Office Depot is focused squarely on its North America operations, Smith said in his statement on Tuesday. He noted that the company completed its sale of its South Korean business late last month and has entered into a favorable agreement to sell its operations in Australia and New Zealand.
Eventually, though, those sales and even high-octane cost-cutting measures may not be enough. Both Office Depot and rival Staples must find a way to thrive in a retail environment that, for office supplies, has increasingly seen sales go to less specialized retailers like Target, Wal-Mart's Sam's Club and, increasingly, Amazon.
While the judge who last year granted the FTC its injunction against the proposed Staples-Office Depot deal didn’t buy the argument that Amazon was enough of a rising player in the space to provide enough competition, Amazon has indeed muscled its way into the office supplies space. That includes Amazon's business-to-business retail efforts, an area thought to be more protected than the retailers’ consumer retail sales, Matt Sargent, senior vice president of Retail at Frank N. Magid Associates, told Retail Dive in an email last month.
“The impact that Amazon has had on Staples' consumer segment cannot be underestimated, but what is more concerning is the impact that Amazon is having within the B2B space,” Sargent said. “Amazon is penetrating small, medium and large corporations within office supplies. This is a red flag for Staples given that corporate office supplies are the most profitable segment of Staples' portfolio.”
It's a concern for Office Depot as well: Its Q1 business contracts sales fell 4% to $1.3 billion in constant currency compared to the first quarter of 2016, largely due to the disruption caused by the retailer’s prolonged merger attempt, the company said.
Nearly a quarter of corporate buyers “frequently” shop at Amazon, according to Magid’s research. “This would not necessarily be a shock for small businesses, but we found this to be true even in large businesses where 22% of buyers buying for businesses over 250 employees indicated they use Amazon ‘frequently.’ When seeing that 38% of Staples' customers use Amazon for business on a frequent basis, it really hits home for the company.”