And as total sales fall 8% for the third quarter, the retailer says it is pushing ahead with transforming itself from a traditional office supplies retailer into a provider of comprehensive business technology and services.

The third quarter may have marked a turning point for Office Depot Inc. and the growth strategy of its new CEO, Gerry Smith.

Our ability to leverage a one-to-one local presence is a sharp differentiator that many online-only businesses are trying to figure out.
Gerry Smith, CEO
Office Depot Inc.

The retailer of office supplies and other business products and services posted an 8% drop in net sales for the quarter ended Sept. 30, to $2.6 billion, as both its Retail and Business Solutions divisions buckled under the hurricanes that hit its markets in the Southeast and Puerto Rico.

It also faced ongoing pressure from competitors as it sought to build a stronger “omnichannel” strategy that uses its retail stores, e-commerce sites and sales reps to interact with customers in multiple ways to offer more personalized service. With a network of 1,400 bricks-and-mortar stores that can serve as distribution points for online orders, Office Depot already has a foundation to better compete in an increasingly online market, Smith says. Office Depot is No. 65 in the B2B E-Commerce 300.

Gerry Smith, CEO, Office Depot Inc.

“Our ability to leverage a one-to-one local presence is a sharp differentiator that many online-only businesses are trying to figure out,” Smith said on a conference call with stock analysts Friday, according to a transcript from Seeking Alpha. He added that the store network enables Office Depot to provide next-day delivery to “approximately 98% of the ZIP codes in the United States.”

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“And I’ll repeat that again, that’s very important—98% of ZIP codes on a next-day basis.”

But the third quarter also marked other key developments that Smith says will position Office Depot to aggressively and successfully transform itself from simply selling office suppliers to providing a comprehensive set of business products, technology and services. Office Depot closed in Q3 on its $1 billion acquisition of CompuCom, which brings to the retailer a “broad set of managed technology services and 6,000 certified technicians,” Smith said on the conference call. He added that CompuCom’s services will complement Office Depot’s extensive base of business customers and its ability to deliver products and services at the local store level.

“This combination will create a unique nationwide omnichannel offering in office supplies and end-to-end technology solutions focused on business customers, with the scale and credibility to stand apart from the competition,” Office Depot said in its third quarter financial report.

Smith noted that the CompuCom deal was followed by last week’s launch of BizBox, Office Depot’s new suite of technology and services including website hosting and design, digital and social marketing, financial and accounting software, CRM and HR and payroll services. Office Depot is offering BizBox services online and eventually plans to sell it through its stores.

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“It’s important that we transform our business as well from a primarily product-based transaction company to a services-driven company that can provide a wider range of solutions for our small, medium and enterprise customers,” Smith added on the conference call.

For the third quarter ended Sept. 30, Office Depot reported:

  • Net sales of $2.620 billion, down 7.6% from $2.836 billion from the comparable year-earlier period;
  • Business Solutions Division sales of $1.288 billion, down 4.4% from $1.348 billion.
  • Gross profit of $633 million, down 12.8% from $726 million;
  • Net income of $92 million, down 52.3% from $193 million.

For the 39 weeks ended Sept. 30, Office Depot reported:

  • Net sales of $7.659 billion, down 7.7% from $8.295 billion a year earlier;
  • Gross profit of $1.854 billion, down 9.7% from $2.054 billion;
  • Net income of $233 million, down 48.1% from $449 million.

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