Office Depot Inc.’s sales to businesses, accounting for more than half of its total sales, continue to lay the groundwork for a stronger financial future at the office supplies company, executives say.

One big reason is the increasing demand among customers for Office Depot’s online business services offered through its Business Solutions Division, or BSD. “Product subscriptions generated through our ecommerce channel were the largest driver of the [13%] increase in BSD service revenues” in the first quarter, CEO Gerry Smith said on a conference call with investment analysts last week, according to a transcript of the call from Seeking Alpha.

Office Depot lets customers subscribe online to automatically reorder such office supplies categories as ink and toner products, breakroom supplies, copy paper and cleaning supplies. It also sells through its BizBox.com such services as website design and digital marketing. Through its CompuCom division, Office Depot offers subscriptions to I.T. services.

Office Depot said sales through its Business Solutions Division increased 1% year over year in the first quarter ended March 30 to $1.34 billion, accounting for about 48% of total sales of $2.77 billion. Although sales in the B2B CompuCom division fell 4% to $247 million, combined B2B sales from BSD and CompuCom of $1.59 billion accounted for 57.3% of Office Depot’s total Q1 sales.

The company didn’t break out ecommerce sales for the quarter, but its total 2018 ecommerce sales are listed as $4.5 billion, according to the just-released Internet Retailer 2019 Top 1000.

Smith said the company expects to put CompuCom, which operates a client portal where customers can place orders, on a path to stronger financial performance by taking such steps as better identifying customer needs and expanding cross-selling opportunities.

Investing more in B2B and ecommerce

Office Depot is also investing heavily in its ecommerce technology and operations. Last week it announced the appointment of Stephen Mohan, a B2B industry veteran, as executive vice president of the Business Solutions Division, effective May 13. Mohan joins Office Depot from XPO Logistics, where he was senior vice president of sales and marketing, North American Transportation.

It’s also spending to upgrade its ecommerce and related operations.

“Capital expenditures in the quarter were $46 million, compared to $37 million in the prior year period, reflecting increased investments in our service platform, distribution network and ecommerce capabilities,” Joseph Lower, executive vice president and chief financial officer, said on the conference call.

“Upgrades to our e-commerce platform and enhancements to our services delivery capabilities,” he added, “will position us for future growth.”

For the first quarter ended March 30, Office Depot reported:

• A 2% decrease in total sales to $2.769 billion, including $2.361 billion in product sales and $408 million in services;
• A 3.9% decrease in gross profit to $641 million, resulting in a profit margin of 23.1%, down from 23.6%;
• Net income of $8 million, compared with $41 million; the change was largely due to a change in income tax.

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