Original Source: FD (FAIR DISCLOSURE) WIRE
DANIELLE FOX, ANALYST, MERRILL LYNCH: Thank you all for joining us this morning to hear from Office Depot. We're extremely pleased to have with us today Pat McKay who is the Executive Vice President and Chief Financial Officer of Office Depot. She's been in this position just since September 2005, and prior to that she was CFO of Restoration Hardware and held a number of senior finance positions at AutoNation and Dole Food Company. She is also a CPA, and she had served on Office Depot's board of directors from May 2004 until she assumed her current position as CFO.
Also with us today is Ray Tharpe who is the Director of Investor Relations. Again, we are extremely excited to have Office Depot with us here today, and I will turn it over to Pat.
PAT MCKAY, EVP & CFO, OFFICE DEPOT, INC.: Minor details -- who is changing my slides? Where is my clicker? Okay, I got it. Good morning. I am pleased to be here at Merrill Lynch's Retail Leaders Conference. I am Pat McKay and I'll give you some insights with respect to Office Depot. First of all, before we get started, I must remind you of course certain statements will be made during my presentation that will be of the nature of forward-looking, and of course we'll have to refer to the Safe Harbor statement that is on the slide and expect you to read that if you would for statements -- for governance, if you will, around the Safe Harbor statements.
First to start with, a bit of a company overview. As all of you probably know, Office Depot is the leading global provider of office products and services. We actually had annual sales in 2005 of $14.3 billion with operations in 22 countries, and we execute through multichannel capabilities, whether it is stores, catalog, Internet, and contract sales. We also operate three divisions -- North American Retail, North American Business Solutions, and International. We are incorporated in 1986. We're a relatively young company; we turn 20 this year. We have been on the New York Stock Exchange since 1991, and we are a member of the S&P 500 since 1999.
To give you a little bit more insights with respect to the sales that we generated, that $14.3 billion of sales, the certain categories that we use to segment out, if you will, those sales are the following -- supplies represented 61% of our sales in 2005, and so those are the things, paper, pens, paper clips, ink, toner, the likes of those kinds of items. Technology represented 26% of our sales globally. That would include laptops, computers, peripherals, and even digital cameras. Furniture and other represented 13% of our sales globally. And we execute and actually generate that revenue through multichannel capabilities to various of our business customers of any size, whether it's small businesses, home offices, and additionally even the larger corporate clients, if you will, the Fortune 500. And we do that through North American retail where we have 1000 outlets in North America and Canada; in fact, 1047 at the end of 2005.
Also, through our business solutions divisions -- catalog, contract, and e-commerce are the multichannel capabilities there. On the international side, we do just generally the same kind of -- we have generally the same kind of multichannel capabilities as we do in North America. That is catalog, contract, e-commerce, as well as to a lesser degree retail. And one of the facts that you may not be aware of is that we are actually one of the largest world's -- the world's largest e-commerce retailers with $3.8 billion in sales, and that is just behind Amazon and Dell. So we are very proud of that particular statistic.
But what you may not be aware of in addition to that fact is as you think about Office Depot, if I were to ask you, who are we, you'd probably think of us as a retailer. Interestingly, only 47% of our sales, so less than half of our sales are actually retail globally, with 53% actually coming from contract, catalog, the Internet, etc. And even if you peel back the onion a little bit more on those retail sales, that 47% is really generated largely from business customers. So 80% of our business on the retail side is not consumer-based but business-based. So again, as we think about who is Office Depot, very much of a business-oriented sales customer as opposed to a more consumer-based customer.
We are fortunate that we have multiple areas of strategic growth opportunities, and we have three strategic growth priorities that are listed here on the slide. The first is North American retail. So each one of our divisions represent a strategic growth opportunity as we see it today.
In North American retail, we know that we can improve our store productivity. We also know that we have opportunities to be able to expand the store base in a meaningful way. We also are aware that our North American business solutions division has opportunities to be able to profitably grow market share, whether it is organic or through tuck-in acquisitions. It's a business that we like in particular because it has a very low capital investment. So the return on invested capital is rather significant there.
And we also see that on the international side where we have been challenged over the last couple of years with profitability, that we know that there are opportunities there to be able to improve the profitability there, expand our contract business in Europe in a meaningful and profitable way. And then on top of that, today our international business is predominantly a European-based business, but we know that there are opportunities for us to expand our geographic presence as we look forward into the future.
Let me shift gears and take a look at specifically the U.S. market. This slide shows you an industry association view of what the office products supply market looks like in the U.S.; $323 billion in 2005, growing from $294 billion in 2002. So a compounded annual growth rate over that time horizon of 3.2%. So a nice increase, kind of a nice pace if you will of increase year-over-year, and you can see the split between retail and delivery. So about two-thirds, if you will, of that …