Office Depot Inc. came off a challenging fiscal fourth quarter, with total net sales down year over year by 6% for the quarter and 3% for the full year ended Dec. 28.
But the company is looking toward better performance in 2020 as it builds on its strength in selling products and services in tailored offerings to businesses, schools, healthcare organizations and government agencies through both online and offline via its Business Solutions Division, which provides products and procurement services tailored to customers, and its CompuCom technology services division.
B2B accounts for 60% of sales
CompuCom sells I.T. services, helping small and mid-sized businesses procure, install and manage I.T. hardware and software. CompuCom makes its services available through its online ClientLink Portal, where customers can purchase I.T. products and request technical support.
Overall, sales through these the Business Solutions and CompuCom divisions account for about 60% of Office Depot’s total sales.
“In the year ahead, we are investing to drive profitable top-line growth in our BSD and CompuCom divisions, expanding our product and services offerings, and continuing to rationalize our retail footprint,” CEO Gerry Smith said today, adding, “Our mission is to be a trusted platform for B2B products and services.”
In the fourth quarter, Office Depot said its capital expenditures amounted to $27 million versus $66 million in the year-earlier quarter, reflecting lower investment in retail operations but continued investment growth in its ecommerce technology, distribution network and other customer services.
Targeting B2B buyers through stores
The company didn’t note a planned amount of capital investment for this year, but Smith said Office Depot’s growth strategy includes expanding its product categories beyond such traditional office supplies as paper and ink cartridges to also include such items as furniture, cleaning and breakroom products, and copy and print services. It’s also driving growth through more cross-selling efforts through its ecommerce site, OfficeDepot.com, mobile app, sales reps, CompuCom technology consultants and Office Depot’s retail store network.
The company’s Retail Division operates about 1,300 stores, though Office Depot ended the last fiscal year with a net decrease of 54 stores, and it expects to close a “slightly” smaller number this year, Smith said on a conference call today with investment analysts.
He added, however, that the retail stores continue to play an important role, including as a way to engage business customers. Many business customers are located within a few miles of an Office Depot retail store, which makes the stores an important way to engage them through such services as buy online, pick up in store, Smith said. “We use our retail stores to target our B2B customers,” he said.
Office Depot last year also entered an agreement with Alibaba Group to provide product and fulfillment services to U.S. customers of the Alibaba.com marketplace.
The joint program has launched a co-branded section of Alibaba.com—“Office Depot on Alibaba.com”—to provide U.S.-based SMBs with personalized access to Alibaba’s global network of more than 150,000 suppliers. The co-branded section will also provide to buyers on Alibaba.com “exclusive” product promotions from OfficeDepot.com as well as in-store promotions available at Office Depot’s network of about 1,350 Office Depot and OfficeMax retail locations.
Office Depot and Alibaba say that their combined resources drive more than 450 million visits annually to website, mobile and physical store locations.
For the fourth quarter ended Dec. 28, Office Depot reported:
- A 6% year-over-year drop in total sales to $2.51 billion;
- A 3% decline in Business Solutions Division sales to $1.26 billion;
- A 16% decline in CompuCom Division sales to $237 million;
- A 4% drop in Retail Division sales to $1.01 billion;
- Net income from continuing operations of $55 million, compared with a year-earlier loss of $14 million.
For the full year, Office Depot reported:
- A 3% drop in total sales to $10.6 billion;
- Business Solutions Division sales of $5.28 billion, virtually unchanged;
- An 8% decline in CompuCom Division sales to $994 million;
- A 4% drop in Retail Division sales to $4.36 billion;
- Net income from continuing operations of $99 million, the same as a year earlier.
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