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OfficeMax Posts Record 1Q Sales, But Loses $2 Million In Earnings

CLEVELAND -- Spurred by a surge in e-commerce business, OfficeMax reported record sales for the first quarter ended April 22, an increase of 14 percent to $1.34 billion, from the $1.18 billion recorded in the first fiscal quarter of 1999. E-commerce sales soared nearly 500 percent during the same three months, from $4.4 million to $26.1 million.

Consolidated earnings/loss for the quarter, however, dropped from a $22 million in the first fiscal quarter of 1998 to a $2 million loss in the same period of 1999. The loss reflects costs related to OfficeMax's previously announced acceleration of its supply-chain management program by one year, with an aggressive marketing program and investment in the operations of the OfficeMax.com segment.

The OfficeMax core business segment -- office supplies, furniture, business machines and peripherals -- enjoyed a 13 percent increase in sales, to $1.25 billion during the first quarter, compared to the same three months last year. Sales in the computer business segment increased 1 percent to $68.8 million for the same period, despite a reduction in average selling prices of about 14 percent for computers during the quarter.

First-quarter earnings for the core business segment dropped from $29.8 million to $7.2 million, down nearly 80 percent from the same three months in 1998. Earnings were impacted by the company's action to accelerate its productivity-enhancement initiative, resulting in additional expenses for its supply-chain management process, increased advertising, and reduced income from vendor-support programs.

Although OfficeMax reported record sales for its e-commerce business, the segment recorded a net loss of $7.4 million for the three months, compared to a loss of $497,000 in the same period last year.

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