The ratings on Boca Raton, Fla.-based Office Depot Inc. reflect the highly competitive operating environment, sensitivity to cyclical economic downturns, some regional concentration in its North America store base, very weak credit protection measures, and declining operating margins that are well below those of Staples Inc., the industry leader. Despite the company's market position as the second-largest supplier in the global office products industry and its diverse channels of distribution, operating performance has been substantially affected by the severe economic downturn, which has contributed to tight consumer and business spending appetites. In the first half of 2009, Office Depot's total sales declined 22%. Weakness in the company's North America Retail division has continued in 2009, as consumers continue to reduce
