The accolades poured in as the company grew 40 percent or more annually and its stock rose tenfold from 1990 to 1995. During those years, Fortune picked Office Depot as the 15th-best stock on the New York Stock Exchange (dossier), returning 223 percent to investors. The Miami Herald named Office Depot Florida Company of the Year, and Fuente repeatedly appeared on Forbes' list of America's highest-paid bosses.
How fast the glitter fades. By 1996 mass-market retailers like Costco and Wal-Mart began nipping at Office Depot's market share while its biggest rival, Staples, was becoming more of a threat. Anxious Office Depot shareholders pushed Fuente to hastily add 223 stores from 1998 to 1999. In the rush managers made poor decisions, unveiling outlets in too many markets. The stores performed poorly. "There was a lot of pressure to open stores, and open a lot of them," says Eileen Dunn, VP of investor relations. "We extended ourselves too thinly across too broad an area."
Fuente's demise came last July, after Office Depot revealed dismal second-quarter results. On sales of $2.6 billion, net income was down 22 percent from the same quarter a year earlier. Six days later, the board handed the CEO title to Nelson and made Fuente chairman. "We were ready for a fresh set of eyes," says Monica Luechtefeld, executive VP of e-commerce. Fuente, as it turns out, was one of 76 CEOs replaced that month.
Bruce Nelson was just what the struggling company needed: a straight shooter who got down to business without wasting precious time. The fact that Nelson "is what he is" is what managers at Office Depot like about him. "This is a CEO of a global, Fortune 500 company, and he's sitting there salivating over a pizza," recalls Dunn of a recent dinner with Nelson at Pizzeria Uno.
Nelson feels the same way about office products. He has spent most of his career immersed in filing cabinets and thumbtacks. He headed up BT Office Products USA in the 1980s and then Viking Office Products (dossier), which was acquired by Office Depot in 1998. After two years overseeing Office Depot's international wing, Nelson was tapped for the top spot. "One of the things the Internet has done is change the rules of business, change the expectations of what speed is," says Nelson, a college cross-country athlete from Utah who still runs when he can find the time. "Today a new CEO has less time to prove or demonstrate that he or she can deliver."
Nelson knew from the start that drastic measures were called for, but he didn't want to repeat Fuente's mistake of moving too quickly. So the new leader began examining a wealth of data generated by the company's sophisticated information systems. "[Nelson] can go through millions and millions of reports every day and can spend no time talking to people," says Dunn.
Suspecting that many Office Depot stores weren't pulling their weight, Nelson analyzed each outlet based on a dozen criteria like return on investment, growth and profitability. "We basically looked at the performance of the entire chain," says Nelson, leaning back in his chair for a rare moment of relaxation. "We queried the database for a list of all the stores that weren't fitting these minimum hurdles."
