The database analysis turned up 109 stores that Office Depot might be better off without. But that, Nelson says, was just the beginning. Data doesn't tell you everything. Human observation and judgment still count. So Nelson and a handful of top executives visited each of the 109 stores in a whirlwind tour that lasted through the fall. They wanted to determine whether the study had missed anything. Was there a shopping mall going up across the street that would bring in new business? Was the store in a poor location?
By the new year, Nelson announced plans to shutter 67 stores in the U.S. and three in Canada - about 8 percent of the company's North American outlets. Four Office Depot markets - Phoenix, Boston, Cleveland and Columbus, Ohio - would be vacated entirely.
The cuts were by far the deepest in Office Depot's history - a realization that the company's haphazard growth had left it in need of an overhaul. But there was more to the downsizing than that. New CEOs often make big cuts to please investors. "There's an expectation that, boy, you gotta do something," says Nelson.
And so the question is: Has Nelson done enough to satisfy shareholders? That's hard to say. During the five months it took to decide where to trim the company, Office Depot's numbers remained shaky. Though third-quarter earnings per share were up over the same period last year (when one-time credits are included), fourth-quarter earnings per share were down. Following the January downsizing announcement, the stock price got a lift and now hovers in the high $8 range. Another bright spot: In the fourth quarter, sales in stores open at least one year grew 4 percent - not a big jump, but more than Staples' 3 percent growth.
Nelson accepts that he'll be held responsible for Office Depot's performance, even though some of the retailer's most serious problems - particularly an upsurge in competition from Costco, OfficeMax (OMX) and Staples - are ones he can do little about. "It's more intense, it's more focused, and there are more of them," says Nelson of the competition. "That is out of your control, and it puts pressure on selling prices, it puts pressure on margins."
All Nelson can do, aside from working long days, is delegate as much as possible. Decentralizing authority has become increasingly necessary at large corporations, and Nelson has embraced it. Still, he admits he lies awake at night worrying whether his lieutenants have absorbed key lessons about winning in today's economy. "There's no such thing as a free lunch!" Nelson booms, explaining that he plans on holding his VPs accountable for their performance. "If I don't do that very well, I won't be here very long."
Is Nelson's own day of reckoning approaching? Though Office Depot board member Austrian declines to talk specifically about the CEO, he says, "I don't know how anybody can be expected to perform in a year, particularly if it's a turnaround scenario." For his part, Nelson acknowledges the pressure of time. "I would expect that the average length of a CEO [term] will be far less in the future," he says, "than it has been in the past." The clocks are ticking.
