Office Depot and Office Max cut headquarters staff by 35%

Toner News Mobile Forums Latest Industry News Office Depot and Office Max cut headquarters staff by 35%

Date: Thursday February 27, 2014 11:05:26 am
Viewing 1 post (of 1 total)
  • Author
    Posts

  • Anonymous
    Inactive

    Office Depot and Office Max cut headquarters staff by 35%
    By Marcia Heroux Pounds, Sun Sentinel

    February 26, 2014, Office Depot and OfficeMax have reduced their combined headquarters staff by 35 percent since merging, new CEO Roland Smith said Tuesday.

    The company, based in Boca Raton, declined to say how many of those layoffs were in South Florida, but jobs at the new headquarters eventually will be "higher than before the merger," spokeswoman Karen Denning said.

    Office Depot also has created a "few hundred new positions" to be based in Boca Raton, she said. Those include president of the North American division and chief strategy and innovation officer.

    Smith said the next steps in integrating the office-supply retailers will include store closures for both Office Depot and OfficeMax, which completed a $1.2 billion merger in November.

    The company on Tuesday reported disappointing revenues and posted losses for its fourth quarter and full year, but Smith said that shouldn't have been a surprise.

      

    "Office Depot and OfficeMax were competing companies, and associates were spending time on completing the merger. It is difficult to focus on business when your personal future is uncertain," Smith said.

    Still, the news sent Office Depot's stock down 14 percent in early trading on the New York Stock Exchange. The stock closed at $4.88, down 8.79 percent.

    Smith said he plans by Friday to finish reorganizing the combined headquarters staff of 3,700. At the same time, new top executives are being hired, with 30 percent so far coming from OfficeMax, he said.

    Earlier this month, Office Depot notified the state of Illinois that it plans to close OfficeMax headquarters in Naperville, Ill., a Chicago suburb, by early 2015, which will result in the layoff of 1,600 employees.

    The quarterly and 2013 financial report was the first under Smith and his newly formed leadership team.

    Smith, former Wendy's CEO, said he expects the combined company to save more than $600 million annually by the end of 2016. Previous management estimated savings at $400 million to $600 million.

    "I'm optimistic we can significantly improve and transform Office Depot's competitive position and build a strong and growing business for years to come," Smith told analysts during a conference call Tuesday.

    Those figures don't include closing Office Depot and OfficeMax stores that are not profitable or that don't fit with Office Depot's "store of the future," Smith said. Office Depot also will increase savings through coordinated advertising and bulk purchasing.

    By year-end, customers will start seeing the same sales circulars and same merchandise at Office Depot and OfficeMax stores.

    "While the signs may be different, by the end of the year the customer experience will be the same," Smith said.

    At the same time, the company will take charges for integration expenses and severance pay to laid-off workers. Office Depot said it will record $400 million in such expenses from 2014 to 2016.

    Some analysts on the call said they are concerned that Office Depot will take a further hit in profits this year due to a weak office-supply market, even as the company works to become more efficient.

    Liang Feng, analyst for Morningstar, said cost synergies and store closures will help in the short-term, but Office Depot "still needs to improve their productivity. This is a long journey."

    He said rival Staples, based in Framingham, Mass., is still No. 1 in the market, even after the retail chains' combination, and that Staples' stores are more profitable.

    The next big step for Office Depot is evaluating individual stores for profitability, location, size and competitive factors. Smith said the company expects to complete that process by the end of the second quarter and begin closing stores in the second half of the year.

    "It's not as simple as looking at two stores that might be close to each other and we're going to close one down," he told analysts.

    During the fourth quarter of 2013, the company closed 16 Office Depot stores and seven OfficeMax stores, and opened one store under each brand.

    The combined companies posted a fourth-quarter loss of $144 million, or 34 cents share. For the year, the retailer's loss was $93 million, or 29 cents a share. Prior quarter and year results are not comparable, as both include the newly integrated OfficeMax's results.

    Revenues were $3.5 billion in the quarter ended Dec. 28 and $11.2 billion for the full year, including $939 million of sales from OfficeMax, Office Depot said.

    North American retail sales from 1,912 stores nationwide increased 31 percent to $1.4 billion in the fourth quarter compared with the same period in 2012, including $384 million of sales from OfficeMax. Same-store sales decreased 4 percent, due to lower average order values and decreased store traffic, the company said.

    Stephen Hare, chief financial officer, said store sales in the fourth quarter were hurt by low pricing of tablets during the holidays, leading to lower sales overall.

Viewing 1 post (of 1 total)
  • You must be logged in to reply to this topic.