Office depot red

Tyler Kerner, Catherine Klasne,Tony Padilla

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OFFICE DEPOT:ANALYSIS AND

EVALUATION

Off and running in 1986

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A HISTORY OF OFFICE DEPOT

The first three were opened in 1986.

OFFICE DEPOT’S GROWTH IN NUMBER OF STORES

Office Depot - 1986 Office Depot Inc., was founded in 1986 in Florida by Pat Sher, Jack Kopkin and Stephen Dougherty Opened first store in Fort Lauderdale in October Opened two more stores by year’s end

Recorded sales of $2 million

OFFICE DEPOT IN 1987

Appointed David I. Fuente Chairman and Chief Executive Officer

Sales of $34 million 10 stores in Florida and Georgia

800 employees

OFFICE DEPOT - LATE ’80S

1988Initial public offering of common stock completed on June 1, 1988. Listed on the NASDAQ under the symbol "ODEP.“ Employee Stock Option Plan adopted. Sales of $132 million 26 stores in seven states; 1,600 employees.

1989Sales of $315 million 67 stores in 12 states 3,500 employees

OFFICE DEPOT - 1990

Merged with Office Club, Inc., on December 20

Introduced Office Depot private label credit card

Opened 100th store in September Began selling personal computers and

peripherals Introduced extensive line of recycled

paper products, initiating company's environmental focus

Opened first delivery center Sales of $626 million 5,600 employees as of February 28

OFFICE DEPOT - 1993

Entered the contract stationer business via the acquisition of Wilson Stationery & Printing Co. and Eastman Office Products Corp.

Miami Herald names Office Depot the Company of the Year in April

Adopted corporate social responsibility program

Established Office Depot Foundation to assist employees and members of the community at large in times of extreme hardship

Sales of $2.6 billion 351 stores in North America 20,000 employees

OFFICE DEPOT - 1994

Acquired six additional contract stationers in North America

Went international by opening licensed Office Depot stores in Israel and Colombia

Announced retail joint venture agreement in Mexico and licensing agreement in Poland

Launched sports and event marketing programs around the country

Raised more than $1 million for its charitiesSales of $4.3 billion 420 stores in North America 26,000 employees

OFFICE DEPOT - 1995

500th store opened in North America Opened stores in Mexico and Poland International expansion in France and

Thailand Established Office Depot's Business Services

Division Introduced Arnold Palmer as the Company's

spokesperson Introduced a Regional Vendor Diversity

Initiative Sales of $5.3 billion 30,000 employees

OFFICE DEPOT - MID-’90S

1996Pioneered its first B2B e-commerce site Sales of $6 billion 570 stores in North America; 31,000 employees

1997Opened 21 new foreign locations, ending year with 45 international locations in eight countries, excluding Canada Designed the first public website to offer the convenience of "point and click" for office supplies needs Dilbert TM introduced as new print and broadcasting icon – online, tooSales of $6.7 billion 602 stores in North America; 35,000 employees

OFFICE DEPOT AND DILBERT

OFFICE DEPOT - 1998

Merged with Viking Office Products, direct marketer in Europe and Australia

By end of year, owned and operated 15 stores in France and had 72 Office Depot locations in Colombia, Hungary, Israel, Japan, Mexico, Poland and Thailand through joint venture or international licensing agreements

Over $1 billion in international sales Over 100 new store openings in North America, highest in

the company's history North American Retail stores sales exceed $5 billion Launched public website officedepot.com in January E-commerce sales totaled $66.5 million Sales of nearly $9 billion (8.99) 702 stores in North America 44,000 employees

OFFICE DEPOT - 1999

Sales exceed $10 billion, first in office supply industry to reach this milestone

Office Depot is included S&P 500 listing in June

Internet Retailer . Office Depot ranked "Top 25 of the Web"

Fortune Magazine . Office Depot named as one of "10 Companies that Get It"

Sales of $10.3 billion 825 stores in North America 48,000 employees

OFFICE DEPOT - EARLY 2000S

2000Appointed Bruce Nelson CEO Adopted strong commitment to corporate values of Respect for the Individual, Fanatical Customer Service and Excellence in Execution. Sales of $11.6 billion; 888 stores in N. America; 48,000 employees

2001Acquired 4Sure.com$1.6 billion in worldwide e-commerce sales Inaugurated National Backpack Program for underprivileged children Sales of $11.2 billion; 859 stores in North America; 45,000 employees

OFFICE DEPOT - 2002

$2.1 billion in worldwide e-commerce sales Expanded into Central America with new retail

stores in Guatemala and Costa Rico through a joint licensing agreement

Sponsorship of 2002 and 2004 U.S. Olympic Team announced

Won naming rights for the sports and entertainment center in Sunrise, FL. Office Depot Center became the official home of the NHL Florida Panthers

Sales of $11.4 billion 861 Stores in North America 43,000 employees

OFFICE DEPOT - 2003

Acquired Guilbert S. A., a leading contract stationer, doubling the size of the company's European business

First office supply superstore to offer fully-functional and comprehensive Spanish website

Number two global online retailer with sales of $2.6 billion

Implemented Ink and Toner Recycling program in stores nationwide; introduced "Green Book" Catalog

BusinessWeek magazine listed Office Depot among the top corporate philanthropists in the U.S.

Sales of $12.4 billion 900 stores in North America 46,000 employees

OFFICE DEPOT - 2004

Appointed Neil Austrian interim Chairman and CEO

Launched first free, nationwide in-store electronics recycling program and free, in-store cell phone and rechargeable battery recycling program in the U.S. and Canada

State of Florida, Office of Supplier Diversity- Corporation of the Year.

Powered 20 retail stores with renewable "Green Power" to reduce greenhouse gas emissions

Listed on Companies That Care Honor Roll Sales of $13.6 billion 969 stores in North America 47,000 employees

OFFICE DEPOT - 2005

Steve Odland appointed Chairman and CEO Named Official Office Products Partner of

NASCAR; sponsored the No. 99 Office Depot Roush Racing Car

Relaunched the Taking Care ofBusiness tagline

Opened 1,000th store Listed on Companies That

Care Honor Roll Sales of $14.3 billion

OFFICE DEPOT - MID-2000S

2006Announced $4.5 million in contributions to higher education Sales of $15 billion; 1,158 stores; 50,000 employees

2007Opened first store in Puerto Rico Opened new Global Sourcing Office in Shenzhen, China Named to the EPA's list of the Top 10 Retail Partners in the Green Power Partnership Sales of $15 billion; 1,222 stores; 50,000 employees

OFFICE DEPOT - 2008

Introduced "Office Depot Green" product line Launched Office Depot Tech Trade-In Program Announced alliance with Netbizz Office Supplies in

Singapore Formed partnership with AGE in Sweden Established alliance with bigboXX.com in Hong

Kong Opened new facilities in Großostheim (Germany)

and Zwolle (The Netherlands) 1,267 storesAlmost $15 billion in salesMore than 51,000 Employees

OFFICE DEPOT - 2009

Opened first retail store in Kuwait Celebrated first season as sponsor of Tony

Stewart, driver of the No. 14 Office Depot/Old Spice Chevrolet Impala SS in the NASCAR Sprint Cup Series™

Expanded line of digital cameras, writing instruments and specialty papers

Announced new assortments of teaching products and plastic storage solutions

1,152 stores, over $12 billionin sales; more than 41,000 employees

OFFICE DEPOT STORE COUNT

GROWTH IN OFFICE DEPOT’S RANKS

OFFICE DEPOT SALES HISTORY

OFFICE DEPOT - STOCK PRICE HISTORY

OFFICE DEPOT - STOCK PRICE 2010

OFFICE DEPOT - STOCK SPLITS

May-92 2: 1 Stock Split

June-93 3: 2 Stock Split

June-94 3: 2 Stock Split

April-99 3: 2 Stock Split

OFFICE DEPOT - CURRENT STOCK PRICE

• OPD - $4.95• Average volume over 6 million

shares per day• 52-week range: 3.36 – 9.19

Office Supply Sector

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ANALYSIS OF THE INDUSTRY

The market structure in which the firm operates: An oligopoly of large international retail-chain businesses that offer:

general office suppliestechnology productsoffice furnitureand services

to the public through its retail storesto other businesses through one or more divisionsand, in some cases, to schools.

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MARKET STRUCTURE

Office Depot competitor and industry leader Staples, Inc., places itself among 21 peers – which it reviews every three years. They are retailers with which the company competes for customers or executives. 31

THE LARGER UNIVERSE

Similarly, OfficeMax illustrates its relationship with other office supply superstores and other retailers, which their investor report calls “niche players.” 32

MAJOR COMPETITORS ARE OBVIOUS IN THIS GRAPHIC.

This slide, part of a 2010 Office Depot shareholder presentation, shows how the Office Supply Sector fits into the overall U.S. office supplies market.

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ODP: OFFICE DEPOTSPLS: STAPLESOMX: OFFICE MAX

The valuation of the office products industry at $309 billion, based on revenues, came the year the overall economy was slipping into a recession.

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CAGR: COMPOUND ANNUAL GROWTH RATE

Not surprisingly, OfficeMax relates industry sales during the recession to the employment of office workers.

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THEY TOOK A HARDER HIT THAN WORKERS OVERALL.

Competitor OfficeMax also sees an opportunity for industry growth during recovery by expanding office supply sales internationally, an area that is increasingly being explored by Office Depot.

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ALTHOUGH THE BIG THREE ARE LOOKING TO THE WORLD AT LARGE FOR OPPOR-TUNITIES, THEIR PUBLIC FACE REMAINS THEIR DOMESTIC SUPER-STORES.

Office Depot: 1,330 (144 in Florida)Staples: 1,555 (97 in Florida)OfficeMax: 933 (55 in Florida) 37

NUMBER OF STORES IN THE U.S.

A merger between Office Depot and Staples was denied by the FTC in 1997 because, it said, the HHI value would exceed 5000 in 42 metropolitan areas for office supply superstores after the merger.

The U.S. Justice Department considers a value over 1800 for any industry to indicate their market is highly concentrated.

Overall, we estimate the HHI for office supply superstores to be about 4300 and calculate the individual scores of the big three to be:

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HERFINDAHL-HIRSCHMAN INDEX

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HERFINDAHL-HIRSCHMAN INDEX

Exploring direct sourcing

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UNIQUE CHARACTERISTICS

OF SUPPLY:

In its own 2009 annual report, Office Depot mentions it is expanding the categories of products it sources and countries it utilizes.

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UNIQUE CHARACTERISTICS OF SUPPLY

One “initiative to increase profitability involves direct sourcing, whereby retailers purchase goods directly from suppliers and cut out any middlemen. … Office Depot and Staples are very competitive in this regard, with about one-fifth of all goods sold coming from respective private labels.”

-- wikinvest.com

3 Words: Back to School

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SEASONALITY OF SALES

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2010: SLIGHT RECOVERY

“Promotions played a significant role in the marketing of OP suppliers. And although results were a little mixed during the bid to drive early traffic in July, promotions did play their part in the strong September.”-- OPI Magazine

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AS BTS GOES, SO GOES THE YEAR

The intense competition from other retailers in areas such as electronics makes this traditionally busy time second to BTS.

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HOLIDAY SEASON

Sales & profits, demand factors, investor analysis

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OFFICE DEPOT: FINANCIAL ASPECTS

Historical & Current

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SALES & PROFITS

SALES HISTORY

Strong historical revenue growth until recent downturn in economic conditions

Revenue (Year-over-Year)

Total company sales of $2.9 billion decreased 4% vs Q3 2009

Year over year sales change improving in recent quarters

Profit (Year-over-Year)

Fifth consecutive quarter of year-over-year margin improvement

SALES & PROFIT ANALYSIS

Strategic Initiatives Offering exciting new assortment in technology

Increasing brand awareness using direct mail and

broadcast media

Nationwide rollout of U.S. Postal Service offerings

in retail stores

Increased marketing of Copy and Print Depot and

Tech Depot services

New point-of-sale system to provide customer

recognition, including Worklife Rewards Members

Integrating marketing efforts with BSD’s Direct

business to reach small business

NORTH AMERICAN RETAIL DIVISION

Strategic Initiatives Implementation of large market business

development teams Stronger focus on National Account business

development Continued focus on growth in the small-to

medium-sized business customer space Continued growth in the Federal Government

sector Adding sales resources in the area of

cleaning and break room supplies Continuing growth and increasing

momentum in Copy and Print business Launching new marketing programs and

loyalty programs

NORTH AMERICAN BUSINESS SOLUTIONS

Strategic Initiatives Focused on winning new customers by refining

business model to become more customer centric,

with better segmentation, refined and coordinated

contacts, refreshed branding, improved pricing and

more robust e-commerce tools

Replacing analog equipment with voice over IP

digital telephony in all our major European markets.

This will allow automated call distribution solutions

to route incoming service requests to the first

available agent with the appropriate skill set

Increasing Office Depot’s global reach and

capitalizing on market opportunities

INTERNATIONAL DIVISION

Economic Indicators & Cost-Cutting Measures

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DEMAND FACTORS& IMPACTS

Macro Economic Indicators

DEMAND DRIVERS

• North American Retail and Business Solutions

• Office Depot’s U.S. business tracks closely with a number of macro economic metrics

• International demand drivers• Impacts of foreign exchange translation

ELASTICITY

Office Depot elasticity is theorized to be >1.

There are many competitors Easy for buyer to go elsewhereEase of entry into the marketplace

Capital Spending 2010 capital expenditures will be allocated in

order to fund ongoing maintenance and other investments needed to drive strategic plan and improve return on investment

Created a Business Process Improvement (BPI) Organization Currently identified $80 million of cost savings

opportunities from indirect spend reductions, finance process improvements and IT integration

Identified working capital reduction opportunities of about $50 million

Targeting a $100 million cost savings annual run rate by late 2013

Supply chain initiative Automated order fulfillment is more productive,

accurate and flexible than other warehouse automation

COST CUTTING EFFORTS

Sales Mirror Economic Recovery

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INVESTOR ANALYSIS

INVESTOR OUTLOOK

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Investor Projections Expect sales to rise 1.3% in 2011, following a projection of a 3.9% decline in 2010 Project a slight widening of gross margins in 2011, reflecting inventory optimization

and increased private label sales, slightly offset by a product mix shift to lower-margin goods

We think the loss of market share and macrorelated challenges have created an overhang of uncertainty, as has the recent departure of the firm's chairman and CEO

INVESTOR OUTLOOK