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OfficeMax Q3 Retail Sales Flat, Income Slides

10/26/2005 09:21:00 AM Eastern

Itasca, Ill. — Impacted by varying back-to-school sales performance in geographic regions and flat same-store growth in most product categories, third-quarter retail sales at OfficeMax increased less than 1 percent, hitting $1.14 billion, compared with a year-ago $1.13 billion.

Retail sales during the period also were impacted by Hurricane Katrina, which caused closure of 24 stores at its peak. All have since reopened. Flat retail sales were partially offset by strong sales in print and document services.

Operating income for the OfficeMax retail business in the third quarter, ended Sept. 24, declined $10.7 million, to $16.1 million, from $26.8 million, due to higher energy prices and employee benefit costs, as well as losses from new stores as these grew sales, said the company. This decline was partially offset by decreased advertising spending, said the retailer.

Retail business gross margin in the third quarter was nearly identical to the same three months in 2004, despite the impact from higher energy costs.

During the third quarter, OfficeMax opened nine new locations, closed one store, ending the third quarter with 957 stores, compared with 933 year-on-year.

For the nine months, retail sales at OfficeMax increased to $6.7 billion from a year-earlier $6.6 billion, while retail income dropped to $23.4 million, from $39.5 million the previous year.

Consolidated third-quarter sales came in at $2.3 billion, down year-on-year from $3.7 billion. Excluding special items and sold businesses, OfficeMax reported sales of $2.3 billion, which was a $53 million increase over the third quarter in 2004.

Excluding special items and sold businesses, consolidated operating income increased $6.9 million in the third quarter, reaching $35.2 million, up from $28.3 million, said OfficeMax.

The company reported a consolidated net loss of $3.9 million, compared with income of $62.2 million in the same three months last year, due primarily to slowing retail sales and the revenue lost from the sale of its paper and forest products business, which was sold in October of 2004.

“Our third-quarter results underperformed our expectations primarily due to the retail segment,” said Sam Duncan, chairman/CEO. “Our contract segment continued to show operating margin improvement, and our retail segment did show areas of strength in key geographic regions and in certain product categories.”

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