CLEVELAND -In moves that OfficeMax Inc. said are "integral to its long-term strategy to significantly improve shareholder value and allow management to fully focus on key initiatives," the retailer has announced the possibility of closing up to 50 underperforming stores.
It also has received commitments for $700 million in borrowing capacity.
"The company's objective is to identify underperforming stores and close or move them to new, more productive locations," said chairman/CEO Michael Feuer. "This has the potential to have a very meaningful benefit to the bottom line."
The locations in review, said Feuer, are "sub-optimized by virtue of poor location, including effects from changes that have taken place in retail trading areas." It is "a natural evolutionary process," he said, "for a rapidly growing company such as OfficeMax to develop a disciplined methodology to constantly monitor and act on those sites that don't meet the company's performance criteria."
For fiscal 2001, beginning in late January, OfficeMax said it plans to reduce new store openings to an unspecified number, which will be less than the 54 superstores expected to open this year. The vast majority of the retailer's openings next year will be in existing markets. It operates almost 1,000 locations in 49 states.
In addition, the retailer said it has settled protracted litigation with Ryder Integrated Logistics, which OfficeMax initiated three years ago.
OfficeMax will record an approximate $14.4 million non-cash charge as a result of writing off a receivable it had previously recorded arising from its original agreement with Ryder. The write-off against assets will be recorded in the third quarter.
OfficeMax said Fleet Retail Finance will handle the $700 million revolving credit facility. The retailer also has made a new $50 million arrangement with another financial institution for letters of credit.
In the first half, ended July 22, OfficeMax reported a net loss on a consolidated basis of $26.2 million, compared to income of $24.4 in the same period the previous year.
For its second quarter, ended July 22, the retailer reported a consolidated loss of $24.1 million, compared to a $2.4 million profit in the year-ago quarter. The company's core segment incurred a $13.2 million loss in the second quarter, compared to a profit of $9 million in the same quarter the previous year.