Office Depot's (ODP) BAP To Lower Costs, Improve Efficiency
Zacks Investment Research | Jan 07, 2020 07:49AM ET
Office Depot, Inc. (NASDAQ:ODP) has been making every effort to refashion itself in a bid to counter an environment where demand for office products (paper-based) has shrunk thanks to technological advancements. The company has been focusing on business operating model, viable projects and cost structure. It has been concentrating on e-commerce platforms and focusing on providing innovative products and services.
The company has initiated Business Acceleration Program (BAP) that involves reducing costs, improving operational efficiencies, enhancing service delivery, using technology and automation efficiently and identifying strategic investment opportunities. Moreover, in order to control discretionary spending, the company adopted zero-based budgeting approach. As a result, management earlier guided cost savings of at least $40 million in 2019 and to attain more than $100 million in annual run-rate costs savings thereafter.
Further, the company has been focusing on improving conversion, product assortment mix and exploring store-within-a-store opportunities. The company has been improving in-store shopping experience and expanding into adjacency categories, including the cleaning and breakroom category and copy & print services and furniture. Adjacency categories account for approximately 37% of total Business Solutions Division sales.
The company has been also making incremental investments to restructure itself into a product and services-driven enterprise. Management intends to increase revenue contribution from services to approximately 20% of total sales.
In this regard, it signed a channel partner agreement with MicroCorp, a premier value-added distributor of telecom and cloud solutions. It also launched a subscription-based business services platform, BizBox, to assist start-ups and small businesses on host of things such as website designing, financing and accounting service, HR/payroll support and others. The company also entered into an alliance with Telos Identity Management Solutions to offer identification verification and background check services.
Further, Office Depot is on track to revive sluggish CompuCom segment, which was touted to help the company to acclimatize to the fast-changing retail landscape along with providing enterprise-level tech services and products to customers. In doing so, the company undertook strategies — including streamlining operational structure, exploring options to speed up cross-selling opportunities and restructuring customer-facing organization.
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All said, we hope that this Zacks Rank #2 (Buy) company’s well chalked out endeavors will help it sustain the momentum in the days ahead. Shares of this Florida-based company have gained 37.4% in the past three months compared with the Zacks Investment Research
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