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Office-Supply Chains Post Q2 Losses; Merger On Track

8/11/2013 08:00:00 PM Eastern

NEW YORK — Office Depot and OfficeMax each posted losses for their fiscal second quarters and reported progress with their pre-merger integration.

No. 2 office-supply chain Office Depot attributed weak laptop demand, reduced government purchasing and $30 million in pretax charges to a $64 million loss for the three months, ended June 29.

Net sales slipped 4 percent to $2.4 billion, while North American retail sales fell 5 percent to $939 million and North American comps declined 4 percent for the period. Revenue was impacted by lower sales of technology products and peripherals, particularly midpriced laptops — the largest chunk of its laptop assortment — as the market continues to transition to tablets, Office Depot said.

Restructuring charges and store closures contributed to a $28 million operating loss for the North American retail division, down from $50 million for the prior year period. The chain opened three new North American stores and closed five during the quarter, for a total of 1,109 in the U.S. and Puerto Rico. It operates 1,614 stores worldwide.

Chairman/CEO Neil Austrian said, “Sales continue to be impacted by a sluggish technology category, particularly laptops, as well as ongoing budgetary pressure on our federal accounts.

“Despite these headwinds,” he continued, “we were pleased with our cost reduction actions and progress on our key initiatives. In addition, we remain actively engaged in integration planning related to the proposed merger with OfficeMax, which we continue to expect to close by the end of the year.”

Meanwhile, No. 3 office-supply chain OfficeMax said a 4.3 percent decline in second-quarter net sales, to $1.5 billion, contributed to a $10 million loss for the period, ended June 29, compared with net income of $10.7 million last year.

Within OfficeMax’s retail segment, sales declined 5.6 percent to $683.4 million and comp sales slipped 3.6 percent due to decreased customer traffic and reduced CE sales. Comps for the company’s 842 U.S. stores fell 3.7 percent, and comps for its 90 locations in Mexico declined 3.4 percent.

In a statement, president/CEO Ravi Saligram said the company’s balance sheet was bolstered last month by a $72 million cash infusion from its investment in Boise Cascade, and that despite “secular challenges and an uneven economic recovery, we remain committed to restoring sales growth by evolving our business model to focus more on services, innovating new products and categories, growing our adjacencies, and building our omni-channel capabilities.”

Separately, both companies reported “significant progress” on their merger preparations following the hiring of The Boston Consulting Group in May, and reaffirmed initial projections of $400 million to $600 million in annual savings by the third year of their union.