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OfficeMax Q1 Profits Fall 57% On Store Closings

5/08/2012 09:57:55 AM Eastern

Naperville, Ill. - Costs for closing 23
U.S. stores during the first quarter dragged OfficeMax's profits down 57
percent for the period.

Net income was $4.9 million for the three
months, ended March 31. Excluding the charges, earnings were $20.3 million, a
78 percent gain.

The No. 3 office-supply chain said it may
close another dozen U.S. stores this year and open one or two new locations. It
currently operates 874 stores domestically.

Net sales edged up 0.5 percent to $1.9
billion during the first quarter, and same-store sales slipped 2.1 percent due
to reduced store transactions, the company said.

Retail sales decreased 2.7 percent to
$912.3 million, reflecting the same-store sales decline, and income for the
company's retail segment was $22.8 million, or 2.5 percent of sales, compared
with $25.6 million, or 2.7 percent of sales during the year-ago quarter.

Retail segment gross profit margin
increased to 29.3 percent, from 28.7 percent last year, due to lower occupancy
costs, reduced inventory shrinkage and unfavorable import duties during the
year-ago period. These were partially offset by increased delivery expense due
to higher fuel costs and discounting of products at stores that were closed
during the quarter.

Operating, selling, general and
administrative expenses (OSG&A) as a percentage of sales were 26.8 percent
for the retail segment, up from 26 percent last year due primarily to slightly
higher store bonus expense and higher spending associated with the chain's
growth and profitability initiatives.

"We are off to a good start in 2012, and
the team delivered solid first-quarter results," said OfficeMax president/CEO Ravi
Saligram. "We are making steady progress in executing the early stages of our
strategic plan."

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