Office Depot Spat Costs Newell $50 Million

Newell Brands lost some $50 million in sales last year after it sporadically stopped some shipments of its markers and other writing SKUs to Office Depot, according to The Wall Street Journal. The manufacturer halted the shipments because it believed the office supply chain wasn't spending what was agreed on to spotlight and market Sharpie markers and other Newell brand products, people familiar with the situation told the newspaper. The disagreement resulted in a 10% decline in fourth-quarter core sales — or a $50 million drop compared to the same period last year — for the manufacturer's “Learn” unit, which includes writing products, Newell told the Journal. The two companies have since settled the dispute.Despite the sales drop in the company’s fourth quarter (ending Dec. 31, 2017), Newell chief executive officer Michael Polk said the retailer forced his hand. He told the Journal that Office Depot was spending too little to promote markers, pens and pencils through store displays and other vehicles, instead using some of that money to support its own profit margins and offset declining sales. “When those guys feel that foot traffic pressure, they have to cover their margins and their earnings,” Polk told the Journal. “How [do] they do that? They hold on to spending and don’t pass it through to the consumer. If you don’t contest that when it occurs, you find yourself funding their margin and you can’t do that.”Sales for Office Depot's retail division decreased 11%, 7% and 8% in 2017, 2016 and 2015, respectively, according to the retailer's 2017 annual report. The declines were attributed to hurricanes Harvey, Irma and Maria in 2017 — which disrupted normal operations at some Office Depot locations — and store closures during all three years. The retailer has closed 535 stores since 2014 and plans to shutter about 20 in 2018.Manufacturer and retailer disputes are becoming par for the course. In its 2017 fourth-quarter earning call last August, Campbell Soup Co. warned its sales would suffer in fiscal 2018 after it failed to reach an agreement on a promotional program with a "key customer" for its U.S. soup business. The key customer was Walmart, people familiar with the situation told The Wall Street Journal.Campbell's soup sales declined 9% in its first quarter (ended Oct. 29, 2017) and 7% in the second quarter (ended Jan. 29). "The issue with the key customer … continued to negatively impact our U.S. soup sales this quarter," said Campbell ceo Denise Morrison during a second-quarter earnings call in February. "I'm encouraged that we're engaging in ongoing discussions with this key customer and making progress."

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