Dobbs: At the Depot

10/24/2003 12:00 am EST


Lou Dobbs

Anchor and Managing Editor, CNN News

Lou Dobbs takes a unique approach in his excellent The Lou Dobbs Money Letter --he highlights companies that he expects will prove to be successful investments as a result of the excellence of their management. Here, he looks at Office Depot and talks with its CEO.

"You're probably already familiar with Office Depot (ODP NYSE), the world's largest seller of office products. The Florida-based company was founded in 1986, went public two years later, and now has 1,045 stores in 12 countries. Sales in the past quarter were $3.2 billion, up 13% from the previous year.

"I like Office Depot for a couple of reasons. First, the company has a good strategy for growth, and is remodeling and upgrading its stores over the next year. Second, and just as important, the company and CEO Bruce Nelson believes strongly in making Office Depot a 'compelling place to work, shop, and invest'--the kind of company that will make investors money over the long run. Bruce has been CEO since 2000.  I talked to him about the company's strategy and the core values that could serve as models for any business in the country. Let me share with you some brief excerpts of our discussion.

Lou Dobbs:How do you as the CEO try to inculcate those values into your organization, to your employees, and your management?

Bruce Nelson:  I've always had the belief that if you earn employees' loyalty, they can in turn win the loyalty of customers. Ultimately, that is how you win shareholders. I was given this job because we hadn't done a good job with shareholders. For the most part, that's why CEOs get fired.

Lou Dobbs:Office Depot's stock has a price-to-earnings ratio right around 15. Do you think that the stock is fairly valued, especially versus your competitors?

Bruce Nelson: There's not a CEO on the face of the Earth who thinks that their stock is fairly valued. I'm in that camp. I don't quite understand the market-cap gap between Staples and Office Depot. Certainly Staples has been better at delivering consistent results in the past four or five years, but that gap closed measurably over the last three years, and there is almost a two-times difference in our market caps. That's enormous, and hard to understand. I'd like to think that ours is undervalued as opposed to theirs being overvalued. So, from a relative perspective, I don't think our market-cap gap is appropriate. I think we've demonstrated that we can execute, we can grow our business and we can grow the company.

"As you can see, Bruce Nelson is a quality CEO running a successful and growing business, and doing it the right way by looking out for employees, customers, and shareholders. To my mind, those are the companies that build long-term wealth for investors."

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