Office Depot 2003 Annual Report Download - page 4

2003 was a year of both significant
accomplishments and continued
challenges for Office Depot.
Our strong North American Delivery
and International businesses combined
to produce segment operating income
growth of $182 million, or 32 percent,
over 2002. This growth more than offset the $106 million
year-on-year decrease in North American Retail segment
operating profit. Collectively, total Company 2003 segment
operating income, before general and administrative
costs, grew by 8 percent to $1.07 billion. Our acquisition
of Guilbert, one of the leading contract stationers in
Europe, virtually doubled our international business and
positions us as the largest reseller of office products
across Europe. The integration process to date has been
virtually flawless, and we are on track to deliver planned
results. In addition, the continued outstanding performance
of our European business ex-Guilbert was noteworthy
throughout the year. We also reported sizable reductions
in Japan’s operating losses as we continued on our path
to profitability in that large and strategically important
country. As a result, our international business has never
been stronger or demonstrated better performance, and
in the fourth quarter of 2003 exceeded 25 percent of our
total Company sales.
In our North American Business Services Group, we
accelerated growth rates in our large corporate account
customer base. We redeployed and repositioned our North
American sales force, which will lead to accelerated
growth rates in 2004. Finally, we achieved our third
consecutive year of North American warehouse efficiency,
productivity, and quality growth.
We faced a difficult year and many challenges in our
North American Retail business. Despite our sales
challenges, we have positioned ourselves for future
growth. We created and successfully executed a chain-
wide rollout of Ink Depot. During the fourth quarter of
2003, we implemented significant changes in furniture
and technology assortments in our North American retail
stores. We launched Magellan, the largest business
project in Office Depot’s history, which we believe will lead
to improved sales, margins, comps, and supply-chain
performance. We began the rollout of our Millennium store
remodel format in North America. We remain relentlessly
focused on our plans to accelerate growth in our North
American Retail business: new merchandise assortments
and initiatives, new store formats, an aggressive store
remodeling program, and the accelerated openings of new
and smaller stores in our core markets. These actions
were beginning to show impressive results in the early
part of 2004.
Over the past three years, we have generated more than
$2 billion of operating cash flow, and we have used these
funds to invest and strategically reposition the Company
for growth. We have made investments in warehouse
technology and systems that have driven efficiency,
lowered cost, and increased quality. We have entered new
countries as well as new channels in existing countries.
In five European countries we were recognized as one of
the best places to work.
We have utilized online tools to drive out inefficiency,
lower costs, and increase both the quality and the quantity
of our management information. We have tested and
opened new retail concepts. From Lantana to Millennium,
we have learned, tested, and rolled out new store formats.
We have discovered a way to lower the square footage
requirements in an existing North American store by 20 to
25 percent without negatively impacting store growth. We
have opened stores in Stop-n-Shop, in Albertsons, and on
military bases.
Our Global Assets
To Our Shareholders:
OFFICE DEPOT 2003 ANNUAL REPORT
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