Office Depot Chairman and CEO Odland resigning

10/25/2010

BOCA RATON, Fla. — Office Depot Inc.'s Chairman and CEO Steve Odland is stepping down as the office supplier struggles to turn its business around in the face of tough competition.

The disclosure on Monday that Odland has resigned comes only days after the company, Odland and another executive agreed to pay civil penalties tied to Office Depot's disclosure of corporate information to a select group of investors and analysts.

Office Depot also announced that it expects to report a profit for its fiscal third quarter. Wall Street analysts had expected a small loss.

Office Depot's stock rose 42 cents, or 9.1 percent, to $5.05 during midday trading. The stock has traded between $3.36 and $9.19 over the past 52 weeks.

Odland's departure is effective Nov. 1. The company said he would stay on as a consultant until the end of the year to assure a smooth transition.

The company said lead director and former NFL President Neil Austrian will step in as interim chairman and CEO. He also filled the position on an interim basis before the company brought on Odland in 2005, after Odland turned around Autozone as CEO there.

Office Depot, based in Boca Raton, Fla., has struggled to come up with an effective way to beat back competition from Staples, OfficeMax and general merchants like Target, Walmart and discount stores.

Odland began a plan to cut jobs and close stores, but “the turnaround stalled as a result of company-specific issues that were compounded by the recession,” said William Blair analyst Jack Murphy. Blair noted the company's stock price has fallen about 80 percent since Odland arrived.

Morningstar analyst Joscelyn MacKay said a clearer vision is needed and that's likely the reason for Odland's departure.

“It is our hope under new leadership Office Depot can come up with a cohesive turnaround strategy with measurable and achievable targets,” said MacKay.

Austrian, the interim CEO, said in a statement that Office Depot feels “this is an appropriate time to seek new leadership to make the most of the platform we have in place, return to sales growth, improve financial performance and reinvigorate our franchise.”

Office Depot did not return a call seeking more specific reasons for Odland's departure. It has tapped Heidrick & Struggles to help it find a permanent replacement.

The company, which is based in Boca Raton, Fla., reported last week that it agreed to pay $1 million to settle federal charges that it overstated earnings and shared information with a select group of investors and analysts that it failed to include in public filings. Odland and former Chief Financial Officer Patricia McKay agreed to pay civil penalties of $50,000.

In the spring of 2008, a dissident shareholder group had sought to replace Odland and former Chairman David Fuente from the board but withdrew its nominees in the face of resistance from major proxy advisory firms.

In July this year, Office Depot reported that it narrowed its second-quarter loss but its revenue continued to fall.

For the third quarter, Office Depot expects earnings of 18 cents per share on revenue of about $2.9 billion. The earnings results would include significant tax and interest expense benefits that added about 15 cents per share to its earnings, the company said. The company also expects its total operating expenses to drop by approximately 8 percent.

Analysts surveyed by Thomson Reuters, whose estimates usually exclude one-time items, forecast a loss of 3 cents a share on revenue of $2.9 billion. In last year's third quarter, Office Depot reported a loss of $1.51 per share, or 8 cents per share on an adjusted basis, and revenue of $3.03 billion.

Office Depot, which has 1,600 stores worldwide, will report its third-quarter results on Wednesday.