Office Depot Earnings Call – Real Talk

With “Real Talk” we give you an abridged break down of corporate earnings calls and our take on what the executives are really saying / general commentary.

Today we are taking a look at the Office Depot’s (NASDAQ: ODP) Q2 2017 earnings call. Translated text/info from the call is in bold, our commentary is in italics.

Gerry Smith (Office Depot’s CEO)

Good morning to everyone on the call. I am happy to be here with you today to discuss Office Depot’s second quarter results.
Are you though? There is zero chance that you’re happy to share these type of numbers with anyone. If you see Gerry coming towards you on his way to this meeting, walk the other way.

Sales of $2.4B, down 9% from last year. Operating Income was down about $10M from the prior year. Operating margins were also down, about 10 bps
As per my comment above…

We have also made great progress on divesting on international businesses. We recently finalized the sale of our businesses in South Korea and in mainland China and are now waiting final regulatory approval in order to conclude our sales in Australia and New Zealand.
Translation: Our fire sale is going grrrreat

I’ve spent a significant amount of time recently working with my executive team ….to provide you with the solutions you need either on the web, in our stores or through our dedicated sales teams on both a local and nationwide basis and with offering that can scale to meet your business needs…..I believe this integrated model is a key differentiator for us against competitors and we are one of the few companies focus on taking care of this business opportunity.
If I’m hearing this correctly, and I like to think that I am, then your key “differentiator” is literally exactly what your biggest competitor (Staples) does (stores, online, B2B). Not sure if you have heard or not, butttttttt their stock price has been in a nose dive and they just got taken private to try and save them.

Speaking about the Loyalty program: “VIP Members will receive 5% back on paper, ink, toner and copy and print services. In addition, they are receiving free delivery with no minimum order size.”
I swear, Ink and Paper are like Schedule 1 drugs for Office Super Store retailers. No matter how much they need to get off of them…they just can’t. This is what it looks like when your sales portfolio is over leveraged.

As I mentioned earlier, we closed a total of 31 retail stores in the second quarter bringing the total closures onto the second phase of our retail optimization plan to 105 stores.
Execs love describing shitty situations with words that sound better, and honestly, I need to use this in my real life. “I’m going to optimize my bank account this weekend” i.e. spend a ton of money at bars or  “sorry I need to optimize our relationship status” doesn’t that sound so much better than “I’m breaking up with you” …Genius

Time for Analyst questions

Right off the bat it’s just smooth sailing

Analyst: (long winded question)
CEO: Hello?
Analyst: Operator, they are not hearing our response.
Operator: I apologize there will be a slight delay in today’s conference. Please hold and the conference will resume momentarily.
Operator: Pardon me, Analyst could you please repeat your question.
Analyst: (Repeats long question)
Operator: I apologize Analyst, there will be another slight delay in today’s conference. Please hold and the conference will resume momentarily. Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today’s conference, please hold and the conference will resume momentarily. Thank you for your patience.
CFO: Hey Analyst, Steve here. Can you hear me now?
Analyst: I hear you, can you hear me?
CFO: Yes. We’ve heard your question twice Analyst, we hope Steve can answer, we apologize for the technical challenges.

We’ve all been here on conference calls before, but my god guys, just reading this makes me want to launch my desk phone across the room

Analyst: …Could you discuss the value you see in potentially buying a significant number of stores in the space if they became available?
CFO: That’s a clever way to introduce that question, I like that. Obviously, we can’t comment on acquisition activities, as a result of what our competitors do.

Ruthless, Staples’s body isn’t even cold yet and they are already vulture’ing


Analyst: Do you plan on buying up any Staples stores during the yard sale that Sycamore Capital will soon be having?
CFO: (Trying to hide his huge shit eating grin) We are thrilled that our biggest competitor will likely be leaving the Office Supplies B2C market wide open to us, but 100% yes we’ll be buying some of those stores.

Analyst: Okay. The marketplace is always very competitive I mean that’s changed over the last several years, but are you seeing any incremental competition in terms of the new entrance of Amazon business or just sort of changes in competitive dynamics, people getting more aggressive or anything among those lines?
CEO:I think it’s fair to say there is lot of companies that are seeing competition from online retailers and that’s why it’s so important that we’re executing strategic initiatives. As I discussed, our last mile footprint is an advantage and I think our omnichannel approach is different than what our competitors have done. Our customers will love this and it will allow us to compete longer term. We are making significant investments in supply chain and that’s going to be a differentiator over a period of time also. So, it’s supply chain, it’s our omnichannel approach, we step back and charge and getting the market that in the segmentation to correct and we are seeing the results is been place two and a half months to three months now and we are going to see that optimization take place.
CFO: Anthony, I would add to that I think that what we talk about in the new wins or not as a part in our sales numbers I think part of that is exactly what you pointing out is that people like Amazon business are pulling away some business from our poor customer bases even though contract customers to us are the safest and that’s a phenomenon that we are dealing with and that’s also part of the sales change overall but overtime our pace of wins should drive that number in a positive direction.


Analyst: You mentioned that you aren’t growing as much as you would like, is that because of Amazon?
CEO: (whispers under breath) shit I was kinda hoping they wouldn’t ask me any Amazon questions……uhhh (flips through retail buzz word generator)……..We are going to optimize our last mile omnichannel capabilities……. boom, nailed it!
CFO: (Of course Amazon is hurting our sales, but here’s my spin on that) Amazon is taking some (read: a lot) of business from us, but those are the bad customers we don’t want anyway (bad customers…sureeeee). (grabs horse shoe, rabbits foot and four leaf clover) That’s fine though, cause they can’t take all our customers HAHAHAHAAHHA (nervous laugh)

Most text from the call was provided by

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