Office Depot pushing the envelope in bid to get back to the top

By Emily Roach

Palm Beach Post Staff Writer

Updated: 4:00 p.m. Saturday, March 17, 2012

Posted: 7:39 p.m. Friday, March 16, 2012

— Office Depot needs to be a leader, not a lagger.

That’s how Kevin Peters, president of the company’s North America division of retail and contract sales, sees the office supply chain’s future mission for technology sales.

But it’s a reflection of the company’s whole outlook.

After three years of losses, Office Depot made money in 2011 by scaling back stores and reducing product assortment.

The chain – headquartered in southern Palm Beach County since it established a corporate headquarters 25 years ago – boosted its profit margin but continued to see declining sales in stores open more than a year. It’s a good-news, bad-news scenario that is not sustainable in the long run, analysts say.

“So the strategies we’ve put in place worked: They’ve got our business healthy again; cash flows have been positive,” Peters said. “And so the next step for us is to transition our product assortment, transition our marketing efforts so that we can begin to grow top-line sales.”

That means Peters needs stores to sell more. So he’s changed the store formats and emphasized more profitable products and services, such as photocopying, printing and computer repair.

The office supply chain is facing pressures far beyond the economy, as such discount stores as Walmart and such online operations as have eroded its sales. That’s in addition to Office Depot’s industry tussle with Staples and OfficeMax.

Success of the retail chain is important to Palm Beach County, which has an investment in its future – $952,825.71, in fact, since economic development leaders persuaded the corporation in 2006 to keep its headquarters here.

Another payment is due if Office Depot’s latest job audit meets incentive levels for Sept. 1, 2010, through Aug. 31 . The audit was delayed for 30 days and is expected by March 31, County Administrator Shannon LaRocque said.

Significant local role

Office Depot is known for its generosity locally and beyond. It’s given 3 million backpacks to needy kids and regularly hosts events to champion women and minorities in business.

Every business has gone through ups and downs during the recession and recovery, said Kelly Smallridge, president and CEO of the Business Development Board of Palm Beach County, which helped negotiate the economic development agreement.

But Office Depot gives as much as it gets, with its global presence providing global exposure, Smallridge said. The county couldn’t afford to lose the retailer’s corporate offices, and also gained its international division with the new location.

Office Depot moved a few miles from Delray Beach to Boca Raton, keeping its workforce here at an average salary of $109,587, according to the last job audit.

In 2006, two years of hurricanes had the company considering a different location, Smallridge said. Many question whether the firm would have risked losing so many skilled employees in a forced move, but Smallridge said she has seen IBM, Motorola and others leave the county in her 20-plus years with the public-private Business Development Board.

She helped put together the incentives that kept Office Depot in the county in 1990, back when it relocated to a 100,000-square-foot office in Delray Beach and boosted its 310-person corporate workforce by 100.

“We absolutely refuse as economic development leaders to take a company’s presence for granted,” Smallridge said. “Too often we have seen companies leave our county, and we want to prohibit that in the future.”

The company met its first goal, building a 210,000-square-foot complex at 6600 N. Military Trail in Boca Raton.

It has maintained the required 1,750 jobs for two years.

So far it has added two of the 200 jobs it must add by Aug. 31, 2014. Then it would have to maintain 1,950 jobs for the final five years of the contract.

Yearly incentives have been reduced from a possible $650,000 for 10 years because the company’s initial commitment to creating 580 jobs was downsized to 200 by the time the agreement was signed in 2009.

The company is committed to creating 430 jobs to fulfill its state-paid portion of the economic incentives .

The state paid $2.7 million through a Quick Action Closing Fund at the time the building was constructed and another $2.7 million in two additional grants. Through the end of 2010, the state had paid $258,000 for its portion of the Qualified Target Industry Tax Refund Program, of which the county is a partner .

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