Office Depot Expands and Some Ask Why

Discussion
Mar 04, 2004
George Anderson

By George Anderson

Brian Postol, an analyst with A.G. Edwards & Sons, can’t figure out why Office Depot would be looking to add stores after years of seeing same-store sales decline.

“I would like them to concentrate on trying to improve the retail concept. They can get better bang for the buck with the existing store base rather than adding to the problem.”

Mr. Postol may not understand it, but Office Depot has nonetheless announced it plans to buy 124 former Kids R Us store sites from Toys R Us. It will pay $197 million in cash for 89 of the stores and assume the leases on the remaining locations.

According to the Miami Herald, Office Depot will convert up to 60 of the locations for its own use and sell the rest.

A spokesperson for Office Depot, Brian Levine, said, “This deal expands our presence in existing core markets and immediately gives us access to larger markets where we don’t have a large retail presence. It’s part of our corporate strategy to grow our North American retail business.’

The deal will give the office supplies retailer a greater presence in New Jersey,
New York and Pennsylvania, while opening up two new markets, Connecticut and
Massachusetts.

Moderator’s Comment: What
are your thoughts on Office Depot’s purchase of 124 former Kids R Us stores?

Office Depot has so much work to do in turning around
its existing business, it’s hard to fathom why the chain would venture into
opening new stores. If we were a stakeholder in Office Depot, we’d be praying
they got a great deal on the real estate.
George
Anderson – Moderator

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