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Office Depot, CEO Agree to Part Ways

Posted on: Monday, 4 October 2004, 06:00 CDT

DELRAY BEACH, Fla. - Office Depot Inc. chairman and CEO Bruce Nelson has resigned after four years in the job at the nation's second largest office supply retailer, which has been struggling with lower sales and tough competition from Staples Inc. and OfficeMax.

Neil Austrian, a board member and head of the finance committee, was named to replace Nelson temporarily. A company news release said Nelson had resigned by mutual agreement with the board.

The nation's second-largest office supply retailer lowered its earnings expectations for the third quarter and for the year last month, citing lower sales because of hurricane disruptions and soft European business.

"The lack of execution and focus has been the key reason why we haven't had the kind of financial performance that the board would expect," Austrian said.

The change at the top comes as industry-leading Staples Inc. and No. 3 OfficeMax try to expand beyond their regional strongholds after launching big-box retailing for office needs in the 1980s.

Ulysses Yannas, an analyst with Buckman, Buckman & Reid Inc. in New York, said he believed Nelson lost his job over disappointing results from the acquisition last year of Guilbert, Europe's leading distributor of office equipment and supplies.

Nelson said last month that the Guilbert contract business was posting lower sales than a year earlier.

Yannas did credit Nelson with the success of Office Depot's Internet business.

"It won't be that easy to find somebody to take over. There aren't too many good people around," Yannas said. "I don't see how any guy under the same circumstances could have done better."

A company spokesman said Nelson was not giving interviews. In a statement released by the company, he said, "I firmly believe that the company's best years are ahead."

Austrian said in a conference call that he will serve as an "active and engaged" interim chairman and CEO while the executive search firm Heidrick & Struggles seeks a permanent replacement, hopefully early next year.

Austrian, a former National Football League president and onetime executive of the investment firm Dillon Read, said he wants to "jump start growth" but build profits rather than simply boosting sales.

"Clearly we're not happy with margins," he said, while acknowledging that he didn't have specific improvements to offer. "Improving the prospects of North American retail is the No. 1 priority of the business."

Office Depot agreed in March to buy 124 Kids 'R Us stores and expects to open 50 to 55 of them under its red-and-white banner after sorting out all of the real estate issues, including some planned sales and lease restrictions barring a new office supplier, said Charlie Brown, the company's chief financial officer.

James Heskett, Office Depot's lead director, said the company was "both fortunate and gratified" to have Austrian step in.

Office Depot shares rose 6 cents to close at $15.14 on the New York Stock Exchange. The company, founded in 1986, has 1,105 Office Depot stores in 14 countries.

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