Office Depot passes on big revenue

July 20, 2010 - 0 comments

Boca Raton-- U.S. retailer Office Depot said it would not renew a contract it has had since 1996 that is responsible for more than 4 percent of its annual revenue.

The company said the contract with Los Angeles County was "onerous" and would "negatively impact Office Depot's profitability," The Palm Beach (Fla.) Post reported Tuesday.

However, the contract serves more than one customer; it also is the link to a non-profit group, the U.S. Communities Government Purchasing Alliance.

Michael LaPierre, program manager for the non-profit agency said, "They are the same commitments (in the proposed new contract) that Office Depot made in 2005 when they won the current office supplies contract."

In a statement, LaPierre said the retailer "mischaracterized" the new contract.
R.J. Hottovy, a market analyst at Morningstar, said the move was made "to improve profitability," despite the loss of revenue.

"They're losing a customer that's only marginally profitable to them and, instead, they'll branch out into higher-margin customers," Hottovy said.