The sale of business furniture declined 16% in 2001, after a 14% increase in 2000. The decrease in 2001 is consistent with the slowing economy and decisions to cancel or defer office-related purchases. The sale of business machines and supplies increased in both periods.
Lower margins on paper and machine supplies contributed most notably to the decrease in gross profit in 2000 compared to 1999. Increased costs of these core products and decreased prices in response to competitive pressures negatively impacted gross profit for 2001. Also in 2001, sales increases in the North American Retail Division were not sufficient to leverage the additional expenses incurred with the addition of new stores. Gross profit includes fixed costs such as occupancy and rental costs for equipment in the print and copy centers.
A significant portion of the comprehensive business review completed at the end of 2000 was focused on the North American Retail Division, and among other things, included a commitment to enhance the shopper's experience in the retail stores. Office Depot implemented a division-wide re-merchandising campaign that included personal training, improved signage and lighting, improved product adjacencies, and additional private label merchandise. For the North American Retail Division, the largest components of operating and selling expenses are personnel, facility, advertising, and credit card expenses.
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Company Strategy.
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A company's business strategy outlines the steps the company will take to carry out its goals and deals with the issue of how to build a strong long-term competitive position. Office Depot's goal of being the industry leader in office supply retailing is accomplished through three key tactics: (1) Respect for the individual, (2) Fanatical customer service, and (3) Excellence in execution. .
Office Depot realizes that its most valuable asset is its workforce.
