Dive Brief:
- Office Depot, Inc. has appointed Gerry P. Smith as its new CEO, effective Feb. 27, 2017.
- Smith replaces Roland Smith (no relation), who announced his retirement in August 2016 after Office Depot's planned merger with Staples fell through. Roland Smith will remain chairman of the office supplies chain’s board.
- Gerry Smith currently serves as executive vice president and chief operating officer at global technology firm Lenovo Group.
Dive Insight:
Roland Smith signaled his intention to step down three months after Office Depot’s proposed $6.3 billion merger with rival Staples fell apart in the wake of a U.S. District Court Judge granting the Federal Trade Commission's request for an injunction against the deal.
While the combined might of Office Depot and Staples could have neutralized the growing threat posed by online competition (in particular Amazon), both office supplies retailers are now struggling to move forward as archrivals: Office Depot in September announced an agreement to sell its European business to investment firm The Aurelius Group, and in December, it detailed an aggressive cost-cutting effort that includes closing 300 stores over three years.
On a December conference call with analysts, Smith reiterated a strategy to build business contracts sales and streamline its supply chain in the name of “optimizing and reinventing retail.” Which is where Gerry Smith enters the picture: Prior to rising to Lenovo EVP and COO, he served as senior vice president of the PC company's global supply chain, and according to an Office Depot press release, research firm Gartner ranked Lenovo’s supply chain among the world’s best.
“Gerry possesses significant operating expertise, having successfully led business units across Lenovo’s entire product portfolio,” Warren Bryant, lead director of Office Depot’s board of directors and chair of its CEO search committee, said in a statement. “His long-standing relationships with some of Office Depot’s largest suppliers will enable him to quickly transition into the role. Additionally, we are impressed with Gerry’s demonstrated ability to lead large, complex organizations.”
First and foremost, Smith must figure out a solution to the challenge that his predecessor could not: Specifically, how to differentiate Office Depot’s brand in a marketplace increasingly dominated by Amazon. The commodity nature of Office Depot’s merchandise makes creating compelling experiences in stores difficult, experts say. Even much of the commodity merchandise sold at Target and Wal-Mart, like cleaning supplies and baby goods, still offers room to experiment. But office supplies are particularly difficult to play around with, aside from some differences in “green” products and design. For the most part, machines and ink and toner are going to be available anywhere office supplies are sold.
“You can go to Wal-Mart, you can go to Target” for many of the things Office Depot sells, Scott Wagner, a partner at law firm Bilzin Sumberg and an antitrust expert, told Retail Dive last year. Consumers may also visit furniture stores for other products and even drugstores for a few items.
Office Depot is slated to release its fourth quarter financial results on March 1, and previously stated it expects total revenue to fall shy of the $3.48 billion recorded in Q4 2015. The company bested third quarter expectations with earnings of 16 cents per share, topping analysts' estimates of 15 cents per share. However, revenue decreased 7% from the year-ago to $2.84 billion, missing Wall Street's estimates for $3.49 billion. Total adjusted sales slipped 4% compared to the prior-year quarter, and same-store sales declined 2% on lower transaction counts.
