Office Depot 2007 Annual Report Download - page 4

2
PART I
Item 1. Business.
Office Depot, Inc. is a global supplier of office products and services. The company was incorporated in 1986 with
the opening of our first retail store in Fort Lauderdale, Florida. In fiscal year 2007, we sold $15.5 billion of products
and services to consumers and businesses of all sizes through our three business segments: North American Retail
Division, North American Business Solutions Division and International Division. Sales are processed through
multiple channels, consisting of office supply stores, a contract sales force, an outbound telephone account
management sales force, internet sites, direct marketing catalogs and call centers, all supported by our network of
crossdocks, warehouses and delivery operations.
Additional information regarding our business segments is presented below and in Management’s Discussion and
Analysis of Financial Condition and Results of Operations (MD&A) elsewhere in this Annual Report on Form 10-K.
North American Retail Division
Our North American Retail Division sells a broad assortment of merchandise through our chain of office supply
stores in the U.S. and Canada. We currently offer general office supplies, computer supplies, business machines and
related supplies, and office furniture from national brands to our own private brands, which include Office Depot®,
Niceday™, Foray®, Ativa®, Break Escapes™, Worklife™ and Christopher Lowell™. Most stores also contain a
design, print and ship center offering graphic design, printing, reproduction, mailing, shipping, and other services.
Our retail stores are designed to provide a positive shopping experience for the customer, supported by an effective
and efficient supply chain. We strive to optimize visual presentation, product placement, shelf capacity, in-stock
positions, and inventory turnover, as well as our distribution capacity and handling costs. Our goal is to maintain
sufficient inventory in the stores to satisfy current and near-term customer needs, while controlling the overall
working capital invested in inventory. Currently, most store replenishment is handled through our crossdock flow-
through distribution system. Bulk merchandise is sorted for distribution and generally shipped the same day to stores
needing to replenish their inventory.
In recent years, we have developed a new store format that we call “M2.” This design is intended to enhance the
overall shopping experience for customers by providing improved lines of sight, more effective product adjacencies
and updated signage and lighting, while lowering overall operating costs. This format is being used for all new store
openings and remodels. In 2007, we remodeled 177 stores, and we expect to remodel all remaining stores over the
next few years. While we believe the current M2 format is a desirable design and an improvement over prior
designs, we may continue to improve it in the future.
At the end of 2007, our North American Retail Division operated 1,222 office supply stores throughout the U.S. and
Canada. The largest concentration of our retail stores is in California, Texas and Florida, but we have broad
representation across North America. The count of open stores may include locations temporarily closed for
remodels or other factors. Store opening and closing activity for the last three years has been as follows:
Open at
Beginning
of Period Opened Closed
Open at
End
of Period Relocated
2005........................................................ 969 100 22 1,047 6
2006........................................................ 1,047 115 4 1,158 7
2007........................................................ 1,158 71 7 1,222 3
We plan to continue our store expansion by adding approximately 75 new retail stores in 2008.
North American Business Solutions Division
We provide office supply products and services directly to businesses through our delivery operations in the U.S.
and Canada. In 1998, we expanded our catalog business and strengthened our international operations through our
merger with Viking Office Products (“Viking”), a company that sold from catalogs and operated customer call