Office Depot CEO worried about small U.S. businesses

CARY, North Carolina Thu Oct 15, 2009 8:33pm EDT

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CARY, North Carolina (Reuters) - The U.S. economic recovery will be slower than in past recessions because small businesses are still having a very difficult time obtaining lines of credit, said the head of office supply chain Office Depot Inc (ODP.N) on Thursday.

"If you look at every small business, they almost always took out a second mortgage on their house, or (tapped) home equity lines of credit. But in this economic disaster it's been all about housing-led economic downfall, so those lines of cash are not available for small businesses," said Office Depot chief executive officer Steve Odland. "We're very pessimistic about the chances for a big bounce recovery."

Odland said sales of small-ticket items such as toner and paper have improved as people restock, but big-ticket items continue to lag.

"The office furniture business is dead," he said. "People are not buying office furniture."

To compensate for slower sales, Odland said Office Depot has dropped the value of its inventory by 30 percent, to about $700,000 per store, compared with an average $1 million per store.

Office Depot is "finding it very difficult to raise prices," but added that the "good news is that we are finding our cost structure is stable."

Odland, who was attending the Business Council gathering of U.S. CEOs, said he believed the U.S. government must reach trade agreements with its international partners quickly.

The theme of the October conference in Cary, North Carolina, was energy and global competitiveness.

"Global trade is very important," he said. "We can't look inward here. We need to move on our trade agreements. More trade is good for everyone, it builds wealth. We can't become protectionist."

(Reporting by Chelsea Emery; editing by Carol Bishopric)

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