Consultancy Jones Lundin Beals, New York, last week contacted ad agencies about the office superstore account. The request for proposals is due back the first week of December. The Delray Beach, Fla., company is believed to be looking only at East Coast agencies.
Agency executives close to the situation said the account is being pegged at more than $50 million, which is less than the retailer spent in 1999. The chain spent almost $100 million in measured media last year, and $54 million in the first half of this year, according to Competitive Media Reporting. Jones Lundin Beals referred questions to Office Depot, which did not return calls at press time.
The review comes as the biggest office supply chain battles financial troubles. Weak sales in North American retail stores were blamed for soft third-quarter results. Third-quarter operating profits for the North American retail division were down 31.6% to $85.8 million. Earlier this month, CEO Bruce Nelson warned fourth-quarter performance would be lower than the flat results that had been expected. Since taking over as CEO last summer, Mr. Nelson has reviewed all company operations and is considering closing some of its 860-plus stores in Canada and the U.S. The company already announced it would consolidate 24 customer service call centers into seven, and invest more than $25 million to upgrade the call centers.
Howard Davidowitz, chairman of retail consultancy Davidowitz & Associates, New York, said a review is logical for companies experiencing difficult times.
Office Depot incumbent Gold Coast Advertising Associates, Miami, said it has not been notified of a review. The agency has handled Office Depot's business on and off since 1987. The retailer gave the account briefly to J. Walter Thompson, Chicago, in 1996. The business moved to DeVito/Verdi, New York, last year but has since returned to Gold Coast. It's unclear whether the retailer will retain its "Taking care of business" theme.
Office Depot is the country's largest office superstore, with sales for the 12 months ended Oct. 31 of $11.2 billion, followed by Staples at $10.2 billion and Office Max at $5.1 billion, according to researcher Morningstar. Office Max this year tapped Publicis Mid-America, Chicago, after an extended review. Staples uses Cliff Freeman & Partners, New York. A Staples spokeswoman said Cliff Freeman is creating ads to run in January and February. Staples spent $83 million on 1999 advertising, compared with $66 million for OfficeMax.
These are difficult days in the office supply industry. Office Depot stock closed at $6.69 on Nov. 24-more than 55% off its 52-week high. Staples closed at $12, off its yearly high by 57%. OfficeMax hovered at $2.69-down 65% from its 52-week high.
The review is not expected to affect Office Depot.com, handled by Arnold Ingalls Moranville, San Francisco.
Contributing: Wendy Davis