Second-largest office products company with recognized brand name; and Currently adequate liquidity. Highly competitive and cyclical operating environment; Weak profitability; Sales correlation with white-collar employment levels; and High rent burden due to oversized stores. The ratings on Boca Raton, Fla.-based Office Depot Inc. reflect Standard&Poor's Ratings Services' opinion that the company's business risk profile is "vulnerable" (as our criteria define the term), largely due to significant competition; demand correlation with white-collar employment; the strong bargaining power of large corporate customers; and low, inconsistent profitability. We consider the office product retailer's financial risk profile "highly leveraged" (as defined in our criteria), including sizable lease-adjusted debt levels and weak cash flow, partly owing to the high rent burden associated with
