Office Depot quietly fills head merchant spot, yet again

DELRAY BEACH, FLA. —When it comes to significant developments at Office Depot, forget about the proxy battle that will come to a head later this month at the company’s shareholders meeting. Chairman and ceo Steve Odland and former ceo David Fuente are facing the possible loss of their board seats if enough shareholders side with a dissident investor seeking to install two former office products industry executives.

The prospect of that happening is considered remote, but the ongoing debate between Office Depot and shareholder Levitt Corp. has served as a distraction from a more recent development of potentially more significance.

In late March, as Office Depot and Levitt were trading barbs in filings with the Securities and Exchange Commission, Office Depot added the name of Steve Mahurin next to the title of evp of merchandising as part of an updated presentation posted on the investor relations section of the company’s Web site. There was no glowing press release touting his credentials, as is often the case when retailers fill high-level merchandising roles, but Retailing Today confirmed that he previously spent four years at True Value where he was highly regarded as the company’s senior vp and chief merchandising officer. Prior to that, Mahurin spent 13 years with The Home Depot where he enjoyed a noteworthy career beginning as an assistant store manager and rising to the position of senior vp of merchandising.

At Office Depot, Mahurin will have responsibility for a merchandising group in pursuit of well-established priorities in a challenging market, so the need isn’t so much to chart a new direction as it is to improve the execution of existing strategies. Beyond that, though, his greatest contribution could be to bring stability to a merchandising group that has experienced turnover at the highest level during the past decade. For example, Mahurin fills a position previously occupied by Kim Maguire, who joined the company last November, but left for personal reasons at the end of February. Maguire was hired to fill a position previously occupied by Scott Koerner who had joined the company in 2004 and served as senior vp of merchandising at the time of his departure last year.

Prior to Koerner, the head merchant responsibilities were handled for a period of several years by Chuck Rubin, who had joined the company in March 2004 as evp and chief merchandising officer. By January 2006, Rubin was elevated to the position of president of North American Retail with responsibility for store operations, merchandising, marketing, real estate and construction.

At the time of Rubin’s hiring, the head merchant job had been vacant for roughly six months following the September 2003 departure of evp of merchandising David D’Arrezzo. He left the company to join the Raley’s supermarket chain after holding the job for less than a year. He was appointed to the head merchant job in July 2002 after eight years as a senior merchant with the privately held chain of Wegmans food stores. As was the case after his departure, prior to his arrival the head merchant job had been vacant for six months following a January 2002 decision to move then evp of merchandising Steve Embree into a new role as senior vp of merchandise planning.

Embree held the top merchandising job since January 2000 when the company said it promoted him to the newly created position of evp of merchandising after former president of the merchandising group, Shawn McGhee, was promoted to a new role as president of North America. McGhee originally joined the company in March 1998 as evp of merchandising and marketing.

Although there were several periods of relative stability, changes in senior leadership are always disruptive to merchandising organizations and can hinder the execution of strategic initiatives. That is a key point made by the Office Depot board, which strongly urged shareholders to reject the dissident nominees. “We believe that removing two of the most experienced retailing executives from the Office Depot board would be highly disruptive and could destabilize the company and damage prospects for a successful turnaround,” the company stated.

That would be the case regardless of the alternate directors proposed, but Levitt Corp. has proposed two individuals in Martin Hanaka and Mark Begelman who have distant connections to the office products industry. Hanaka is a former Sears executive who spent three years at Staples as coo before resigning in October 1997 after he was found to have violated company policy by having an inappropriate relationship with a co-worker. A year later, he moved on to become coo of The Sports Authority where he eventually assumed the position of ceo and chairman. In that capacity he sought to execute a turnaround, but ultimately, the chain’s weak performance resulted in a merger with Gart Sports in 2003. The combined company adopted The Sports Authority name and was relocated to Gart’s headquarters near Denver. Hanaka went on to serve on several boards, including Golfsmith, where he was recently named interim ceo.

Begelman also has roots in the office products world and a strong link to Office Depot. He founded the San Francisco-based Office Club chain and grew the company to 51 stores before agreeing in December 1990 to be acquired by Office Depot, which at the time operated 121 stores. Begelman joined Office Depot as coo and reported to then chairman and ceo David Fuente until he resigned in May 1995. Begelman went on to found the chain of Mars music superstores.

It is a stretch to see how the addition of these two executives would improve Office Depot’s competitive position relative to Staples or OfficeMax. However, the addition of Mahurin could be a different story, especially if he remains in the head merchant role longer than some of his predecessors.