PRUDENTIAL SECURITIES CONSUMER CONFERENCE
September 7, 2000
and
GOLDMAN SACHS GLOBAL RETAILING CONFERENCE
September 8, 2000
SAFE HARBOR STATEMENT
SOME OF THE STATEMENTS MADE IN THIS PRESENTATION
ARE "FORWARD-LOOKING STATEMENTS" UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THESE MATERIALS AND THIS PRESENTATION.
SEE OUR SEC FILINGS FOR FURTHER INFORMATION ON
FORWARD-LOOKING INFORMATION.
EXECUTIVE SUMMARY
o Powerful, well-recognized brand
o Leading market positions in North American Retail, Business Services,
E-commerce and International
o $10.3 billion in revenues for 1999
o After missteps in '98/`99, we face several challenges
o Initial steps to address challenges are underway
OFFICE DEPOT TODAY
o Operations in 19 countries
o 978 Retail stores
o 44 Delivery centers
o 7 Unique E-commerce sites
o 48,000 employees
(Pie Chart Omitted)
<PAGE>
1999 Sales: $10.3 billion
BUILDING BLOCKS
o Strong Brand Names
o Global Leadership Position
o Strong Growth Prospects
o Leading E-Commerce Position
o Strong Balance Sheet
CHALLENGES
o North American Retail performance disappointing
- Comparable store sales
- Rapid expansion resulted in poor real estate choices
- Five new major markets in 2 years
o Warehouse costs too high
- Productivity & efficiency
- Viking warehouse integration timing
o Credibility with Wall Street undercut by two earnings disappointments
ACTION STEPS
o Realigned management structure
- Clear P&L responsibility and accountability matches business lines and
market opportunities
- High priority on searches for CFO, President of North American Retail
(Organizational Chart Omitted)
ACTION STEPS
o Initiated extensive review of all aspects of the business
- Retail Store Operations
o Customer experience
- North American Real Estate: market by market, store by store
- North American Warehouses
o Management systems and cost structure
o Complexity (stocked SKUs, store satellite delivery program)
o Viking warehouse integration
o Activity-based cost analysis
- Approach to capital allocation
- Employer of choice
<PAGE>
OPPORTUNITIES
o The office supply market continues to grow
- Market estimated to be approximately $200 Billion*
- Market has grown 8+% over the past 5 years*
- Estimate for future growth through 2005 to be in the 6 - 8 % range*
* BPIA
OPPORTUNITIES
o NORTH AMERICAN RETAIL
- Improvement in comparable store sales
- Real Estate: smaller, underdeveloped and under-saturated existing
markets
- Value-added services
o BUSINESS SERVICES GROUP
- Market share opportunity for contract sale
- Strong growth prospects for direct mail
- Leading E-Commerce position
o INTERNATIONAL
- Build on leading position
- First mover advantage
- Industry consolidation
- Leverage synergies between Viking and Office Depot
GUIDING PRINCIPLE
o Capitalize on market opportunities by focusing on the customer experience
- Drive focus on customer experience to improve retail performance
o Merchandizing
o Associate training o Marketing and advertising
o Store payroll model
o Viking role model:
FANATICAL CUSTOMER SERVICE
LONG TERM GOALS
o Continually improve the customer experience
o Increase position as worldwide leader
o Build on dominant worldwide delivery business position
o Reposition North American real estate
o Recapture leadership position in the capital markets
o Employer of Choice
<PAGE>
RECAPTURING MARKET LEADERSHIP
No quick fix, but...
o Strong building blocks and many opportunities for growth
o Detailed game plan to be developed upon completion of review
o Customer focus will lead to consistent performance
o Provide accurate and consistent guidance going forward
o Office Depot can recapture its leader position
1999 Financial Performance
Chart omitted.
(In thousands)
ODP SPLS OMX
--- ---- ---
Sales 10,263 8,937 4,843
Operating Profit (1) 519 528 119
% of Sales 5.1 5.9 2.5
Net Income (1) 327 315 63
% of Sales 3.2 3.5 1.3
ROA 7.9 9.0 2.8
ROE 16.6 18.1 5.6
Market Capitalization (2) 2,241 7,189 585
1. Excluding non-recurring charges and credits
2. Based upon market close price on August 31, 2000
