Office Depot Pares CE Mix

By Alan Wolf -- TWICE, 9/21/2009

NEW YORK — Office Depot is reducing its commitment to consumer electronics as part of an effort to increase margins and improve profitability.

The office-supply chain’s CE offering represents about 25 percent of its sales mix and is comprised largely of notebook computers, a traditionally low-margin category.

Its pullback from that business has already cost it sales, acknowledged Michael Newman, Office Depot’s executive VP and chief financial officer, which it was willing to sacrifice for the bottom line.

“We mixed away from consumer electronics [to] drive profitability and margin improvement,” he told investors during a Goldman Sachs retail conference. “We want to remain relevant in CE, but don’t want to overly rely on it.”

As a result, Office Depot’s sales have lagged those of channel rivals Staples and OfficeMax, Newman noted, while its decision to not be “overly promotional” in CE contributed to the category’s underperformance during the back-to-school period.

The company will focus instead on services, including its Tech Depot IT support program. It has also increased its assortment of private-label and direct-import products, and is testing a new, smaller format for its stores.