OfficeMax Inc. (OMX) eked out a third-quarter profit, following
a year-earlier period that had a $735.8 million write-down from a
Lehman Brothers Holdings guaranteed-installment note.
Revenue and margins continued to fall as earnings fell well
short of analysts' expectations. Still, Chairman and Chief
Executive Sam Duncan said, "We are proud of the progress we are
making with our business in this tough economy. While continued
lower sales levels strained our profitability this quarter, we
managed to mitigate the impact by reducing costs and improving our
operations."
The company also forecast lower sales in the fourth quarter, but
a smaller decline than the third quarter's 14% drop. It also
anticipates a loss. Analysts' mean estimates, as surveyed by
Thomson Reuters, were break-even results on a 9% sales drop to
$1.72 billion.
Both corporate and consumer frugality have weighed on
industry-wide sales, as rival Staples Inc. (SPLS) has attempted to
weather the economic slowdown by marketing more lower-cost products
and run promotions on high-end items, such as computers, printers
and furniture, with others following suit.
Lower-margin items and deeper discounts only exacerbate already
lagging sales in a consumer market that also includes big-box
retailers such as Target Corp. (TGT) and Wal-Mart Stores (WMT), as
well as business and consumer retailer Office Depot (ODP).
OfficeMax, the No. 3 office-supply retailer reported earnings of
$6.3 million, or 7 cents a share, compared with a year-earlier loss
of $431.9 million, or $5.70 a share. Excluding impacts like the
prior-year write-down, earnings fell to 8 cents from 36 cents.
Revenue slipped 13% to $1.83 billion as same-store sales dropped
11.5%.
Analysts polled by Thomson Reuters expected earnings of 14 cents
on revenue of $1.81 billion.
Gross margin fell to 23.7% from 25.1% amid the revenue
decline.
Sales at OfficeMax's contract segment--its business-to-business
office-products distributor --dropped 14% amid particular weakness
in the U.S.
Shares have pulled back some 25% the past several weeks after a
three-month run-up that tripled OfficeMax's stock. Shares closed
Wednesday at $10.23 and were inactive premarket.
-By Adam Manzor and Kevin Kingsbury, Dow Jones Newswires;
212-416-2273; adam.manzor@dowjones.com
