ODP confirms strategic review of Varis

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ODP confirms strategic review of Varis

The ODP Corporation (ODP) has said a new enterprise-wide program will include a strategic review of its Varis B2B procurement platform.

In its Q4 and FY 2023 earnings release, ODP announced Project Core, which CEO Gerry Smith described as: “A comprehensive initiative aimed at streamlining operations, sharpening our focus on our core business, and increasing shareholder returns through an expanded new $1 billion share repurchase program.”

He continued: “We expect this broad-based plan to generate annualized savings in the range of $50-$60 million when fully implemented. [This will be] achieved through cost efficiency measures across the entire enterprise, including all routes to market, including Varis, as well as corporate support functions, leading to further optimization of our organization and supporting future profitable growth.

“During this effort, we are working to complete a strategic review of Varis and we expect to provide a full update of that review by our first quarter earnings call in early May 2024.”

Finding investment partners for, or even selling off, Varis was one of the recommendations ODP investor AREX Capital Management presented in its open letter to the company’s board at the end of last year. ODP would appear to have listened, although no references to AREX or the ‘AREX Plan’ were made in the earnings release.

The technology issues hampering Varis continued throughout the fourth quarter, judging by the unit’s results. Q4 sales stalled at $2 million – which relates to legacy BuyerQuest business – while it posted an operating loss of $15 million.

In addition, a $68 million non-cash impairment charge related to goodwill at Varis led to ODP reporting an operating loss of $31 million for the final quarter of the year. Cost savings initiatives have been implemented at Varis, Smith confirmed on the earnings call.

Also on the call, Smith confirmed that the ODP board had looked at the merits of breaking up its consumer and B2B operations – another part of the AREX Plan. However, he affirmed the conclusion had been reached that it made strategic and financial sense for these businesses to remain as part of the ODP group.

 

This story was originally published as premium content by our sister publication OPI.
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