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OfficeMax Q1 Profit Up, Sales Flat

5/14/2002 02:12:00 PM Eastern

Cleveland - OfficeMax cited more effective merchandising and marketing programs, improved inventory in-stock position and better in-store execution helped as the primary factors for posting a net income of $63.5 million in its first quarter.

Consolidated sales for the first three months, ended April 27, amounted to $1.18 billion, a virtual wash with the $1.19 billion reported in the first quarter of 2001. Net income was $63.5 million in the first three months, compared with a loss of $16.6 million in the same quarter last year. This quarter's results include a previously reported $57.5 million tax benefit.

Last year's first quarter revenue included sales from 29 stores that were closed on the first day of this fiscal year. When excluding these closed stores, sales for the first quarter rose 1 percent year over year.

OfficeMax said for the second consecutive quarter it improved same-store sales, with levels climbing to even with a year ago. This represents an improvement from a low of negative 8 percent in the third quarter of fiscal 2001, and negative 3 percent for the fourth quarter, ending this past January. In April of the first fiscal quarter for this year, same-store sales jumped to 4 percent, the retailer's best increase in 18 months.

OfficeMax recorded an operating income of $8.1 million in the first three months, compared with an operating loss of $19.5 million in the year-ago period.

'Our dramatically improved results are being driven by very positive sales trends resulting from increased `same-store' customer transactions and a lift of 104 basis points in gross margin,' said Michael Feuer, chairman/CEO, about the retailer's first three months. 'We expect our same-store results and gross margin trends to continue to gain momentum throughout the year, particularly in the second half, producing a profitable fiscal 2002,' he said.

OfficeMax said, based on current trends, this year's second quarter results should also show year-over-year improvements, with same-store sales results moving into positive territory. However, because sales in the second quarter are historically the lowest of the year, the company expects a loss during the period, although less than the year-ago second quarter, followed by a profitable second half, with positive same-store sales.