Out of the Office

Office Depot Inc. (Delray Beach, Fla.) chairman and ceo Bruce Nelson has resigned after four years in the job at the nation's second largest office supply retailer, which has been struggling with lower sales and tough competition from Staples Inc. and OfficeMax.

Neil Austrian, a board member and head of the finance committee, was named to replace Nelson temporarily. A company news release said Nelson resigned by mutual agreement with the board.

Office Depot lowered its earnings expectations for the third quarter and for the year last month, citing lower sales because of hurricane disruptions and soft European business.

“The lack of execution and focus has been the key reason why we haven't had the kind of financial performance that the board would expect,” said Austrian.

The change at the top comes as industry-leading Staples Inc. and No. 3 OfficeMax try to expand beyond their regional strongholds after launching big-box retailing for office needs in the 1980s.

One recent way Nelson sought to differentiate Office Depot from its competitors was through its new Millennium2 design, which features a bright, eye-catching color palette and graphics system, along with an open-format layout and new merchandising strategies. Office Depot opened its first Millennium2 store in Venice, Fla., in June.

According to industry analysts, Nelson lost his job over disappointing results from the acquisition last year of Guilbert, Europe's leading distributor of office equipment and supplies. Nelson said last month that the Guilbert contract business was posting lower sales than a year earlier.

Austrian said in a conference call that he will serve as an “active and engaged” interim chairman and ceo while the company seeks a permanent replacement, hopefully early next year. Austrian, a former National Football League president and onetime executive of the investment firm Dillon Read, said he wants to “jump start growth” but build profits rather than simply boosting sales.

“Clearly we're not happy with margins,” he said, while acknowledging that he didn't have specific improvements to offer. “Improving the prospects of North American retail is the No. 1 priority of the business.”

Office Depot agreed in March to buy 124 Kids 'R Us stores and expects to open 50 to 55 of them under its red-and-white banner after sorting out all of the real estate issues. The company operates 1105 Office Depot stores in 14 countries.