Office Depot to close 112 stores

Click for South Florida Business Journal story or read it below.

The first response I received to the story about Office Depot came from a colleague in banking. She found this a very scary story and wanted to know if I had any positive news to put out. Having read the article, I don’t find it scary on the surface. I guess we could assume that this is a result of today’s economy and it may well be that the economy was the trigger for reviewing performance. From my perspective, based solely on the information in the article, this sounds like action that needs to be taken and perhaps should have been taken sooner. I have no inside information on the circumstances.

In general, all companies should be looking at the performance of their stores, assets, investments, and employees. That’s part of what managers do. You either improve performance to an acceptable level or eliminate the problem. To carry poor performers, be they stores or people, only incurs greater costs and risks to the rest of the organization.

Take a good look at your organization. Do you see opportunities to improve? Do you see the need to eliminate poor performance? We have solutions and expertise to help you through this so your overall performance improves.

Give us a call, we can help.
John Schneyer
Boca Consultants

Here is the story:

Office Depot on Wednesday said it will close 112 underperforming retail stores in North America during the next three months.

The announcement said the closures would occur in various geographic regions, including 45 in the central U.S., 40 in the Northeast and Canada, 19 in the West and eight in the South. Fourteen more stores would be closed through 2009 as leases expire or other lease arrangements are finalized.

Further details on store locations and job losses were not immediately available.

The global provider of office products (NYSE: ODP) said the closures are part of a strategic review announced on Oct. 29. The first wave of closures would reduce the North American store base to 1,163.

The company also said new store openings for 2009 have been reduced to about 20, down from the previous estimate of 40.

This will facilitate a reduction in total company capital spending in 2009 –to less than $200 million, significantly lower than projected depreciation and amortization of $275 million.

Boca Raton-based Office Depot also plans to close six of its 33 distribution facilities in North America. This is consistent with the company’s long-term plan to reduce the total number of facilities and combine its separate supply chain systems.

The company anticipates taking charges, totaling between $270 million and $300 million, in the fourth quarter 2008 and in 2009 for the store closures. But, Office Depot said 2009 earnings before interest and taxes and cash flow should benefit by about $90 million and $70 million, respectively.

Office Depot said further actions are being considered, including the assessment of tangible and intangible assets, including the annual goodwill evaluation, and potentially restructuring businesses.

Office Depot shares were trading up 26 cents at $2.69. The 52-week high was $17.88 on Dec. 11, 2007. The 52-week low was $1.45 on Nov. 21.

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