The ODP Corporation (ODP) has said some of its Business Solutions division (BSD) customers will be switched over to the new Varis procurement platform.
Discussing this on yesterday’s quarterly earnings conference call, ODP CFO Anthony Scaglione didn’t specify the number of businesses this would involve or the sales volumes they represented. However, he said they would be “direct assist customers” that are generally using the BSD platform independently and who typically require a lower level of interaction from the BSD sales force.
Transferring these clients to Varis would bring a number of benefits to ODP, Scaglione stated. These include:
- Enabling customers to enjoy a wider assortment from third-party suppliers, creating additional revenue opportunities for Varis.
- Improving satisfaction levels through a “better and more modern e-commerce experience”.
- Delivering higher overall BSD contract compliance.
BSD will continue to generate revenue from the sales of products to these customers. However, this will come at the expense of some margin loss due to the transaction fee it will have to pay to Varis – just like any other vendor using the platform.
“We believe the benefits related to higher contract compliance, more efficient customer reach, lower sales commissions in certain cases, and the additional opportunity to capture overall gross transaction volume sales more than outweigh the incremental fees [BSD] will incur for using the platform,” said the CFO.
ODP is hosting a demonstration of Varis at the Nasdaq later today (2 March).
Other highlights from the ODP earnings call and its annual regulatory filing include:
- As announced last August, ODP has agreed to sell its corporate headquarters in Boca Raton. This transaction is expected to close in the first half of this year. The headquarters are now classified as assets held for sale on the ODP balance sheet, with a value of $104 million.
- In December 2022, ODP’s board agreed to extend the Maximize B2B restructuring plan until the end of 2024. Introduced in 2020, this programme was delayed in 2021 and 2022 due to the planned spin-off of the retail business. Since 2020, 237 stores have been closed and further closures are expected over the next two years, albeit at a slower rate than the 56 seen in 2022.
- During the call, CEO Gerry Smith highlighted a strategy called ‘Three Horizon’. This is based on: 1) the Office Depot consumer business being a “cash-generation engine”; 2) delivering growth and expanding margins at BSD so its market value represents a higher multiple than it currently has; and 3) pursuing longer-term growth and value opportunities via the new Varis and Veyer business units.
- Jan/san and breakroom sales at BSD are now around $700 million. Taken on an independent basis, this would make BSD one of the largest jan/san supply businesses in the US, said Smith.
- As revealed at its 2022 investor day, ODP is looking at external funding possibilities for Varis. No further updates on this were provided in the call, except the confirmation that ODP is continuing to evaluate alternatives.
- At Office Depot, same-store comps in 2023 are forecast to be down by between 2-3% year on year. This will be a “slight improvement” on last year’s performance.
- The Veyer distribution entity is on track to exceed its 2025 target of achieving $30 million in annual EBITDA from external customers. The EBITDA goal in 2023 is $10 million.