Office Depot to Eliminate 1/3 of Its Workforce
Massive layoffs and an undisclosed number of store and distribution facility closures are coming at Office Depot after the company announced a three-year restructuring plan to focus on its business-to-business operations.
A total of 13,100 employee positions will be eliminated by the end of 2023, according to a filing with the Securities and Exchange Commission on May 14. That figure equates to roughly one third of the 40,000 employees Office Depot indicated it had at the end of its most recent fiscal year.
Office Depot was very precise about the number of employees affected by its restructuring plan and it also was able to peg the total restructuring charge at $543 million. However, when it came to the actual number of potential store and distribution facility closures, the company declined to elaborate. The omission is noteworthy since it wouldn’t be possible to arrive at reasonably accurate head count reduction or restructuring charge figures without envisioning a range of possibilities for a store and distribution facility closures.
“The company is still evaluating the number of potential retail store and distribution facility closures, as well as the timing of any such closures,” according to the SEC filing.
Office Depot ended its first quarter with 1,295 stores, but that figure is well below the 1,912 stores in operation shortly after Office Depot and OfficeMax merged in 2013. A similar decline can be seen in the company’s workforce which was said to total 64,000 employees at the time of the merger.
Office Depot currently estimates it will incur incremental restructuring charges of up to approximately $543 million, $194 million of which will result in cash expenditures by the end of 2023. Those cash expenditures include $30 million for supply chain capital investments and $21 million for IT capital investments. The remaining $492 million of estimated charges expected in the restructuring plan is comprised of one-time costs associated with what the company calls, “potential retail store and distribution facility closures and related headcount reductions.” Those costs are expected to consist of approximately $143 million in cash and $349 million in non-cash.
Of the total non-cash charges, up to $106 million will be for the impairment of certain of the company’s fixed assets with respect to anticipated store and distribution facility closures and up to $243 million in non-cash charges related to store and facilities closures costs by the end of 2023, according to the SEC filing. Estimated cash charges are expected to consist of approximately $55 million for severance and other related employee costs and $88 million for other restructuring related costs. The Company expects the restructuring to result in up to approximately $860 million in net savings by the end of 2023.