Is Office Depot in Trouble?

Various media reports have come to light this week to suggest that Office Depot has lost a source of its financial backing – are Office Depot in trouble?

As first reported by The Telegraph, the stationery retail chain Office Depot’s future could have been cast into doubt, after leading credit insurer, Euler Hermes, spoke with suppliers recently and expressed that they will no longer be covering dealings with Office Depot Europe.

Office Depot Europe is currently owned by the German investment firm Aurelius, with the UK branch of the retailer, Office Depot UK, having been founded in 1991 and forming as part of their European operations.

Whilst it was quoted just two years ago that Office Depot Europe was on track for sustained growth, this latest news is likely to come as a shock to the business and to many of its suppliers and key partners.

How Serious Could Office Depot’s Financial Support Withdrawal Be?

In terms of the knock-on effect this could have on Office Depot, it only needs to be compared to the recent reports of the Australian stationery brand Smiggle, who themselves have been threatened with financial support withdrawal.

Office Depot’s case can be seen as slightly more serious than Smiggle’s situation, as Smiggle at the time of writing are still seeing growth in channels away from their traditional retail stores.

Should Office Depot start to see significant financial losses, they may be able to apply for a CVA agreement in order to help reduce the amount of rent paid on their retail store locations.

The news is certainly a cause for concern, but situations such as imminent closure or closures of several parts of its business may not need to be approached just quite yet.

Office Depot Europe could opt to follow in the footsteps of the American branch of the company, which has begun converting many of its stores into co-working spaces, having seen an increasing interest in professionals and smaller businesses hiring out properties for conferences, meetings or as extra working spaces.

Our Final Thoughts on Office Depot in Trouble

Caution will certainly need to be aired following any situation which involves a loss of financial backing for a major company such as Office Depot.

Having said this, it would be unwise to jump to conclusions too quickly that this might spell the end of the stationery retailer.

Sales report earnings have stated that the company made an improvement in terms of sales and reduced its losses in 2017 compared to previous years, but Office Depot may need to refocus its efforts going forward in order to still compete with the likes of Amazon and avoid the recent plight of the now defunct Office Outlet.

There is also the possibility that Office Depot Europe may be able to find a new source of financial backing should an insurer or investor see promise in what the business can still offer, which would help to lessen the danger of the firm being forced to go into administration.

We will however, be sure to keep an eye on any further developments should they happen.

Sam Rose