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DELRAY BEACH, FL-Office Depot is expanding in the Northeast and plans to open about 40 new-format stores this year in the area. The company’s first store in the format, called Millennium 2 (M2), opened in Venice, FL in June, and it currently operates 30 across the country.

The first Northeastern M2 stores the retailer is opening are in Largo, MD; Nashua, NH; and N. Attleboro, MA. The expansion into the region was helped by the company’s acquisition of 124 former Kids ‘R’ Us units earlier this year from Toys ‘R’ Us for $197 million.

Office Depot is growing in an area where Staples is the market leader, but the region has room for both, says Ulysses Yannas, a retail analyst with New York City-based Buckman, Buckman & Reid. “It isn’t saturated because one company does not saturate a market,” he says. “Staples has done what it’s done, but there’s room for another guy.”

The M2 stores are cheaper to build than the majority of the 923 units in the Office Depot chain, company officials say. Remodeling an existing store into an M2 costs from $250,000 to $300,000, about $100,000 less than a typical Office Depot renovation. And M2 units are about 6,000 sf smaller, averaging 20,000 sf, so they can enter areas where the older stores aren’t able to fit.

Inside, the M2 stores have a different color scheme, increased shelf depth and a redesigned copy area with a 50% reduction in space, but the same functionality. Other interior differences include a five-fold increase in the number of pallets on the sales floor, as well new shelving and signage.

Office Depot’s Northeastern expansion is part of a nationwide store plan. Company officials say they will open a total of 80 stores this year, followed by 100 in both 2005 and 2006. Until this year the retailer had only increased its store count by 12 units since 2000.

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