DELRAY BEACH, FL-”We’re not sitting around, waiting for a permanent CEO,” said Office Depot chairman and interim CEO Neil Austrian in an investors conference call on Monday, held to address questions about the direction of the office supply giant in the wake of the abrupt resignation of CEO Bruce Nelson last month, disappointing third-quarter results, and word that the company would trim about 2% of its North American workers. “But we do recognize that we have not done as well as we can and should do.”

According to Austrian, the company is going to carry on with expansion plans initiated by Nelson, which focus on taking Office Depot into the northeastern United States. The expansion is just now getting under way, with the recent opening of stores in North Attleboro, MA; Nashua, NH; and Largo, MD. These stores, which are among the more than 40 Office Depot plans to open in various parts of the region, feature the company’s new Millennium 2 (M2) format, which puts core supplies at the outer perimeter of the store and furniture and technology at the center, among other features. Many of the new stores will be in former Kids R Us locations that the company bought.

“I’ve been asked, ‘Why expand in the northeast, especially now?’ ” said Austrian. “ I answer, ‘Why give up a third of the U.S. population to the competition?’ Of course, we expect Staples to fight us every step of the way, just as we’ll fight them in Chicago to protect our territory.”

He stressed that the change in executive leadership doesn’t mean discontinuity in managing the company, citing his own experience as a board member, and the Office Depot experience of other senior managers. As for the question of finding a new chief executive, Austrian noted that the search ought to be complete by the first quarter of 2005.

Besides being in the middle of a CEO search, Office Depot just posted a disappointing quarter, and has lowered its expectations for the fourth quarter. Total sales for the third quarter of 2004 were $3.3 billion, a 3% increase compared to the third quarter of 2003, but comparable sales in the 931 stores and 80 delivery centers open for more than a year were flat for the quarter, and operating profit was $135 million, which represented a 5% decrease compared to the same period in 2003. A number of factors were cited for the decrease by the company and analysts, including under-par back-to-school sales and weak sales in Europe. Net earnings per diluted share were $0.28, compared with $0.29 for the same period last year.

Also, the retailer announced last week that it was laying off 800 workers, including those in retail stores, corporate headquarters and its European sales force, which came on the heels of cutting 900 jobs in consolidating operations at eight call centers and offices in six states. “A lot of work and analysis went into those decisions,” said Austrian. “We’re not outsourcing everything, and it doesn’t mean we’re in trouble. We’re rationalizing these aspects of the business.”

He further asserted that Office Depot is in “an operational turnaround, not a financial turnaround. We’ve got a billion in cash and excellent cash flows. Our goals now are to improve North American retail profitability, market share in our Business Services Group, and growth in Europe.”

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