One on One with Steve Odland, Chairman & CEO, Office Depot
Friday, February 22, 2008
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PAUL KANGAS: With the economy slowing and growth concerns abounding, small businesses are feeling the pinch. They make up Office Depot's customer base, so the office supply retailer is often seen as a barometer of the small business community. NIGHTLY BUSINESS REPORT's Susie Gharib recently spoke with Chief Executive Steve Odland and began by asking him how his customers are doing.
STEVE ODLAND, CHAIRMAN & CEO, OFFICE DEPOT: They are hurting, because their business has slowed down dramatically so you see the effects of the housing market on their businesses directly, but I think also the housing market was a source of liquidity for these people, so the very smallest businesses are using home equity lines of credit, refinancing of their own homes in order to fund their business growth. Now that has dried up and so you are seeing less investment by these very small businesses, less growth and in fact, contraction.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT CORRESPONDENT: So Steve, I mean based on what you are saying about the economy and the impact on your small customers, small businesses, how do you manage in that environment?
ODLAND: We have cut back on investments in long-term spending to try to make sure that we govern our growth levels with the amount of business that we have. So we have cut back store openings for instance and expansion, trying to just make sure that we do the right thing for our shareholders and govern our spending to our growth levels.
GHARIB: I know you are not an economist, but what is your prediction for when this trend is going to happen?
ODLAND: There is a big inventory of housing in certain areas of the country that we need to work through, especially Florida and California, Michigan as well so I think what we hear is that things should work through the first half of 2008. It is going to be a little tough, but by the end of 2008 we should work through a good portion of this bubble.
GHARIB: So is business in Europe and other international markets where Office Depot has stores doing any better for you?
ODLAND: Well, Office Depot serves customers in 43 countries and we are seeing great growth around the globe, particularly in Asia, eastern Europe, Latin America, central America. We have seen a slowdown in the past quarter in the UK, which I think is also a sub-prime slowdown and some of the same issues with housing that we see in the U.S.
GHARIB: Staples has been opening stores in many of your markets like here in Florida. How is that affecting your stores and businesses?
ODLAND: I think it is important to understand that the top three retailers in the office products market only make up 10 percent of the entire business, so mass merchants, the direct marketers, grocery stores, drug stores, all of the club stores, all of these different sources make up 90 percent of all of the sales, so there is an incredible amount of market share that can still be had in these businesses and Office Depot needs to do a better job, I think, of getting market share from the alternate channels.
GHARIB: There certainly has been a lot of talk about consolidation in the office supplies business. Does it make sense for Office Depot to be a buyer or seller at this time?
ODLAND: Probably not a good time for us to be going out and buying other companies. I think what we need to focus on is making sure that we are taking care of the customers that we have and making sure that we get through this period of time.
GHARIB: Office Depot stock has dropped 60 percent in the past year. What has to happen to win back the confidence of investors?
ODLAND: I think Office Depot probably disproportionately benefited from the boom in the sunbelt and now we are disproportionately feeling the effects as the boom has gone into a bit of a recession. And as we work through this period of time and begin to get our momentum back, I think that our financial results will follow and certainly our stock price will follow.
GHARIB: Steve, thank you so much for your time.
ODLAND: It is great to be here, thank you, Susie.
