Office Depot shared plans to cut capital spending and new store openings several months ago and disclosed today that it plans to decrease its workforce, too. This is pretty much a no-brainer: Although sales declines certainly have hurt the company's long-term growth prospects, the lack of cost controls is a huge part of the losses.
Cost of goods sold increased by 3.4% for the quarter, which isn't ridiculous considering the drastic inflation that is affecting everyone. Yes, when fuel prices get to $4.00 per gallon, it's going to be more expensive to run your business. But what doesn't make a lot of sense is Office Depot's 17% increase in general and administrative expenses when its revenue isn't increasing.
Granted, the office supply industry isn't a rapid growth sector at this point, so Office Depot isn't alone in its misery. OfficeMax
Office Depot wasn't in a great position to begin with, what with a net profit margin of 2.9% for last year's second quarter. Office Depot has been talking about change for several months now, but results have been slow to come for the company whose slogan is "Taking Care of Business." It's time for Office Depot to cut costs to stay competitive and take care of its own business.
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