CEO Smith outlines Office Depot initiatives

Office Depot CEO Gerry Smith outlined his initiatives “to drive profitable growth” at the company’s “Investor Day” last week in New York City.

The office-supply business, which has been through two leadership changes in the past five years, has had declining annual sales and shrinking profits. The company employs 2,000 at its Boca Raton headquarters.

Smith answered the Sun Sentinel’s questions about his strategy to transform Office Depot into a business services company, and the company’s prospects:

Q: Office Depot has been in turnaround mode for more than five years now. What makes the focus on business

services a winning strategy?

Smith: When I came to Office Depot on Feb. 17, I focused on finding out, what are the core assets of Office Depot? I don’t think the model we had was sustainable.

We’re going to leverage our 28.6 million customers...We’re an omni-channel company (selling in multiple channels including

“[Bankruptcy] is just not going to happen at Office Depot.” Gerry Smith, Office Depot CEO

stores, online, order online and pick up in stores, and contract sales).

Q: Why was CompuCom worth a $1 billion investment?

Smith: Now 14 percent of the business is services — before it was 7 percent. Our goal is to push our business services [by 2020] to over 20 percent. CompuCom has $1 billion of dependable services revenue and 6,000 technicians.

We [also] plan to partner with other people to sell our services in their marketplace — outside the traditional office supply platform.”

Q: What do you see happening with Office Depot and OfficeMax retail stores in the long term?

Smith: We’re not going to use the ‘store of the future’ format [from his predecessor], but are going to make radical changes. We’re not closing stores— it’s a going-out-of-business strategy.”

We’re doing a lot of pilots in Florida. In Deerfield Beach, we’re [testing] a drastically reduced SKU [product in inventory] count.

Q: Amazon continues to be a threat in officesupply sales. What is Office Depot doing to compete in online sales?

Smith: I respect Mr. [Jeff] Bezos and Amazon greatly. But we have a deeper reach than they have — we can deliver a desktop [computer] the next day.

Our online business is tearing it up. Our.order online-pick up [in store] grew over 30 percent in Q1.

Q: Office Depot was listed as one of 12 retailers in 2018 at risk for filing bankruptcy by Retail Dive. Is there that risk?

Smith: We had $737 million in cash as of the first quarter and liquidity [assets that can be converted to cash] of $1.6 billion...[Bankruptcy] is just not going to happen at Office Depot.

The stock price is up 6 percent today. [Office Depot closed Wednesday at $2.46, up 12 cents or 5.15 percent in Nasdaq trading. Shares closed Friday at $2.40.]

We’re not going out of business…..We now have a structural change in the business to generate cash going forward.