UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 13, 2002
Commission file number 1-10948
OFFICE DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
---------------------------------- --------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
(Address of principal executive offices) (Zip Code)
(561) 438-4800
(Registrant's telephone number, including area code)
Former name or former address, if changed since last report: N/A
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99.1 Copies of slides presented at investors and analysts meeting sponsored by
Merrill Lynch and Company on March 13, 2002 by Office Depot's Chairman and CEO,
Bruce Nelson.
ITEM 9. REGULATION FD DISCLOSURE
On March 13, 2002, Office Depot Inc.'s Chairman and Chief Executive Officer,
Bruce Nelson, is meeting with investors and securities analysts at a securities
conference sponsored by Merrill Lynch & Company. The conference is being Webcast
by Merrill Lynch & Company and will be accessible from the Office Depot Website,
www.officedepot.com under "Company Information" and "Investor Relations" at 8:45
a.m. on March 13. Mr. Nelson's presentation also will be available on the Office
Depot Website, under "Company Information" and "Investor Relations" for a period
of fourteen (14) days from the date of the conference. Attached to this Form 8-K
as Exhibit 99.1 are copies of presentation slides being provided to attendees at
the meeting. This filing is provided as a matter of information only.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OFFICE DEPOT, INC.
Date: March 13, 2002 By: /S/ DAVID C. FANNIN
David C. Fannin
Executive Vice President and
General Counsel
MERRILL LYNCH
2002 RETAILING CONFERENCE
MARCH 13, 2002
FORWARD - LOOKING STATEMENTS
You should be aware that except for historical information, the matters
discussed herein are forward-looking statements within the meaning of the
private securities litigation reform act, as amended. Forward-looking
statements, including projections and anticipated levels of future performance,
involve risks and uncertainties which may cause actual results to differ
materially from those discussed herein. You are urged to review our filings with
the SEC and our press releases from time to time for details of these risks and
uncertainties.
WHO ARE WE?
-----------
THE WORLD'S LARGEST SELLER OF OFFICE PRODUCTS AND SERVICES
NO ONE SELLS MORE OFFICE PRODUCTS TO MORE CUSTOMERS IN MORE COUNTRIES THAN WE DO
HOW DO WE DO IT?
----------------
2001 Sales Mix by Segment:
North American Retail: 52%
Business Services Group: 34%
International Division: 14%
E-Commerce (included within BSG and International Divisions): 14%
o 898 retail stores
- 859 North America
- 30 France
- 9 Japan
o 52 warehouses/cross docks
- 24 North America
- 10 NA cross docks
- 18 Internationally
o 26 call centers
o Mail more than 300 million catalogs annually around the world
o 15 unique Web sites around the world
o 45,000 world-wide employees
HOW BIG ARE WE?
---------------
REVENUES*
4 Year CAGR: 8%
($ in millions)
1997: $8,109
1998: $9,007
1999: $10,306
2000: $11,613
2001: $11,154
* Excluding one-time charges and credits
OUR OPERATING INCOME
--------------------
1997 Operating Margin by Segment:
North American Retail: 56%
Business Services Group: 28%
International Division: 16%
2001 Operating Margin by Segment:
North American Retail: 38%
Business Services Group: 35%
International Division: 27%
Operating Profit 4-Year CAGR:
North American Retail: (2)%
Business Services Group: 11%
International Division: 16%
International Division (local): 22%
WHERE ARE WE?
-------------
GLOBAL REACH
Stores Warehouses Call Centers
------ ---------- ------------
USA 824 24 13
Canada 35 - -
Australia - 3 1
Japan 9 2 2
Austria - - 1
Belgium - 1 1
France 30 2 2
Germany - 3 -
Ireland - 1 1
Italy - 1 1
The Netherlands - 1 1
Switzerland - 1 1
United Kingdom - 3 2
Note: Cross-border operations in Austria and Luxembourg
WHAT TYPES OF CUSTOMERS DO WE SERVE ?
-------------------------------------
o Retail: consumers, entrepreneurs, small companies
o Viking; OD Catalog; 4Sure.com: entrepreneurs, small companies, medium
businesses
o Contract: medium businesses and large corporations
o Internet: consumers, entrepreneurs, small companies, medium businesses, and
large corporations
HOW DO WE GROW?
o North American Retail
o North American delivery
o International
o Europe
o Asia (Australia, Japan)
E-COMMERCE LEADERSHIP
o Fifteen distinct Web sites in ten countries around the world
o $1.6 billion in worldwide revenues in 2001
o Profitable
o Fully integrated across systems/delivery networks
o Small business, contract and tech savvy customers
o Award winning
o Highly targeted to customers needs
NORTH AMERICAN DELIVERY
E-COMMERCE LEADERSHIP IN 2001
o Added 500,000 new small business customers to www.officedepot.com customer
base
o Increased conversion rate of registrants from 48% in 1999, to 55% in 2000
to 63% in 2001
o Ranked as 4th fastest growing Web site in Nov/Dec 2001 by Nielsen
o Ranked #1 office products site by DMA
o Grew affiliate program to over 12,000 customers
INTERNATIONAL MARKETPLACE
o Market size estimated to be larger than the U.S.
o Market growing faster than GDP
o More fragmented than the U.S.
SIGNIFICANT POTENTIAL FOR INTERNATIONAL GROWTH
|X| Existing profitable international platform
|X| 12 years of doing business outside the U.S.
|X| International markets growing faster than GDP and more fragmented than U.S.
|X| Viking catalog/delivery leadership position in 8 countries
|X| Super store leadership in France
|X| ODP Business Services Division now in 4 new European countries
HOW DO WE GROW INTERNATIONALLY?
o Existing markets
o Penetrating current customer base
o New channels and brands
o New Countries
o Switzerland
o Spain
o Scandinavian countries
o Expand joint venture partnerships
o Central America
COMPELLING PLACE TO SHOP:
NORTH AMERICAN RETAIL
NEW STORE INITIATIVES
---------------------
SALES FORCE
o Began testing in Q1 2002 in 39 stores and 16 markets
- Local sales reps oversee between 1- 4 stores, depending on size of
market
o Target untapped markets to acquire new customers
- Enhance customer relationship with Office Depot
- Educate customers on products offered and business solutions
- Increase copy & print center sales through direct marketing of
products and services
NEW STORE INITIATIVES
---------------------
SMALLER BOX
O Opened first test in New Orleans in 2001
- 13,000 sq. ft.
- Currently exceeding plan
o Store layout similar to 20k square-feet model with similar number of skus
o Central location (at least 5-minute drive from downtown)
o Plan other smaller store tests in 2002
NEW STORE INITIATIVES
---------------------
WEB IN STORE
O Free-standing kiosks:
- Furniture, technology and copy and print center
- Expanded selling assortment by leveraging the "virtual warehouse" of
furniture and tech depot technology
o "Tech Concierge"
- provide service support for technical questions
o Delivery or pick-up in store
IN-STORE INITIATIVES
--------------------
IMPULSE BUYING
o Add categories of skus to add to market basket and increase average ticket
o Specialty items
- Kiosks near front of store
- Specialty office-related designs
o Executive Shop
- Fine pens, leather products
IN-STORE INITIATIVES
--------------------
CUSTOMER SERVICE INDEX
O Customer survey kiosk at front of stores
- 242,000 hits in January (1st month of roll-out)
- Increase customer response from 45,000 in 2001 to 1.5 million in 2002
- Cost neutral
o Register receipt survey
- online registration
- $1,000 shopping spree
- 40, $100 shopping spree
IN-STORE INITIATIVES
--------------------
NEW PAYROLL MODEL
o Automated scheduling system
- Simplifies process for store manager and allows for better forward
planning
- Interfaces with sales accounting, stores finance and human resources
- Schedules built off sales transaction data
o Employee benefits include:
- Employee skill levels for each selling area taken into account with
new payroll model
- Staffing around employees preferred availability
o Reduced 40 hours of payroll per store planned to be re-invested back into:
- Training
- Incremental customer selling/service hours
STORE OPERATIONS INITIATIVES:
-----------------------------
EMPLOYEE TRAINING
O 2002 payroll savings reinvested into store employee training
o Training in 2002
- Product knowledge training available online via Store Learning System
o "Train track" online learning center
- New online learning management system
- Supervisor and employee training curriculums
o Cross-train employees for various skill sets within stores
COMPELLING PLACE TO SHOP:
INTERNATIONAL RETAIL
FRENCH RETAIL
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O Leading office supply retailer in France
o Began operations, under Office Depot name, in 1996 via 50% jv with
Carrefour S.A., acquired remaining 50% in 1998
o Retail stores open as of fiscal year-end:
- 1996: 2 - 1999: 26 - 2002: 10-15**new
- 1997: 5 - 2000: 28*
- 1998: 15 - 2001: 30
o 175 total superstore market potential in France
o 3 competitors
- Metro Bureau: Metro AG, Germany
- Top Office: Auchan
- Office World: Migros, Switzerland
o Profitable on four wall basis within 10-14 months of opening
o Comparable store sales in France exceeded 16% in 2001
* Includes store closings related to 2000 Business Review
** Estimate
JAPANESE RETAIL
---------------
o Second largest market for office supplies in world
o No similar competitive format
o Very large potential growth opportunity
o Retail stores open as of fiscal year-end:
- 1997: 2
- 1998: 3
- 1999: 6
- 2000: 7
- 2001: 9
o Open 5 new stores in 2002
o Retail comps in Japan were 7% in 2001
JOINT VENTURES/LICENSEES
------------------------
Stores Warehouses Call Centers
------ ---------- ------------
Mexico 61 2 2
Israel 23 1 -
Poland 15 3 1
Hungary 3 - 1
Thailand 2 - -
COMPELLING PLACE TO SHOP:
STRATEGY
DIFFERENTIATE
-------------
|X| Position our brand around people, knowledge and support
|X| Training investment funded through payroll reductions
|X| In-store experience
|X| Stores within stores
|X| Call centers/sales reps
|X| Customer segment/product categories
|X| Use technology to deliver product information and CONTENT (knowledge)
TARGET
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|X| Focus marketing dollars on activities with the highest potential to deliver
profitable sales
|X| " the right mix of media"
|X| Newspaper inserts
|X| Television/radio
|X| Sports marketing
|X| Direct mail
|X| Catalog
|X| One-to-one marketing/messaging
|X| Extensive knowledge of our customers
|X| Sophisticated data warehouse capabilities
INTEGRATE
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|X| Coordinate activities across business units and functions to increase sales
productivity and create lasting relationships with our customers
|X| Grow customer loyalty
|X| Multi-channel buyers spend more and are more loyal, therefore
more valuable...
|X| When customers shop all three channels, they tend to be more
loyal, generate better margins and spend 3 to 4X more.
|X| When a large ODP catalog customer is assigned a contract sales
rep, we see sales increase 5X without a dramatic impact on margin
|X| When phone/fax customers are moved online, average spend
increases 30%
WHY INVEST?
-----------
|X| Growth not limited to US
|X| Strong balance sheet
|X| P/E expansion
|X| Relentless focus on improvement
|X| Consistency of performance
|X| Communication to capital markets
|X| Commitment to grow shareholder value
IMPROVING PERFORMANCE
---------------------
o Sequential improvement in retail comps
o Gross margins increasing across all channels
o Operating costs essentially flat vs. last year
o Improving returns on capital
o Free cash flow growing
o Solid balance sheet
o Stock price rising, still under valued
FOCUS ON FINANCIAL STRATEGIES/GOALS
-----------------------------------
o Earnings growth
o Cash flow
o Capital expenditures
o RONA
o ROE