More on Office Depot

The complaints that have led some shareholders to contest two seats on the board of the office-supply company, Office Depot, ahead of an upcoming annual meeting, provided me with the gist of yesterday's entry here.

ODP has been doing rather poorly of late when compared with its rival, Staples. I suggested yesterday that just looking at the stock price move in isolation might be misleading -- one should look at dividend policy, too.

Although that's a sound general rule, it doesn't help the case for ODP's incumbent management any. This is from ODP's website: "The Company has never declared or paid cash dividends on its Common Stock and does not intend to pay cash dividends in the foreseeable future."

Staples, on the other hand, just last week paid a cash dividend of $0.33 per share. It has been in the habit of paying dividends each March, like giving away an Easter egg, and this year's was larger than that of either of the two eggs. Though that may sound flip of me, I'm a very pro-dividends kind of guy, and I'll write something more on that point tomorrow.

So if ODP is going to justify their underperformance vis-a-vis Staples, it won't be on the basis of the dividend stream! What might they say, though? Well, as it happens, ODP did send out a letter to its shareholders yesterday making its case.

It didn't say anything at all about the ODP/Staples comparison. It did acknowledge recent troubles, but qualified that with the comment that there already has been a lot of turnover in board membership lately. There is no need for the dissidents' proposed "fresh faces," then, since the incumbents are new enough to still be fresh.

The statement also discussed in general terms the ODP turnaround plan these fairly-fresh faces have produced and should be left free to execute. Slowly growth to enhance focus, store remodelling, loyalty programs, revisions in both catalog and on-line marketing, etc.

There's nothing in it that bowls me over. If I had this stock, I'd be ticked off. But would I fight, or would I just sell it. That's always the question in these situations, isn't it?

Office Depot Underperforming Staples

The Woodbridge Group has sent its fellow shareholders in Office Depot (NYSE: ODP) a letter giving their reasons for dissatisfaction with that company's current board of directors and management.

Certainly the one-year stock price chart for ODP helps them make their case. Last April, the price was flirting with $37 a share. That flirtation didn't go well. She kicked him to the curb.

A steady decline began in June, and led to what seemed in September to be a floor of $19. The stock moved up from that floor as far as $22, then fell back again, crashing into the basement. It's now move $11 a share.

This, though, doesn't make a case by itself. These are difficult times. Lots of companies arehaving trouble. So (the Woodbridge Group suggests) let's look at the competition: Staples (NYSE: SPLS).

Back when ODP was flirting with $37, SPLS's dalliance was with the more modest-sounding figure of $26.50.

While ODP has lost more than two-thirds of its value in the meantime, SPLS, which is also down, has lost only 16% of its value, since it is now at $22.40.

This comparison may be unfair. It is always possible in such cases that the stock that underperforms if we're looking at price is also the one that's been spitting out dividends. I haven't checked into that possibility here.

Still, the Woodbridge Group complains that on basic operational metrics, Staples outdoes Office Depot. Same store sales data, for example. Again, as with stock price, both company's have fallen, But the fall is much more dramatic in the one case than in the other. Same stock sales are down for Staples by 5%. They're down for Office Depot by 24%.

The annual meeting is scheduled for April 23, at the Boca Raton Marriot.

I'll look into this particular dispute somewhat further tomorrow.