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OfficeMax Q3 Sales Decrease 8.5%

11/13/2001 09:32:00 AM Eastern

Cleveland - The slowing economy, combined with the Sept. 11 attacks, "materially impacted the performance at OfficeMax during the third quarter. The retailer said its estimated sales loss resulting from the terrorist attacks was about $30 million during the third quarter.

Overall third-quarter sales decreased 8.5 percent in the three months ending Oct. 27, reaching $1.19 billion, down from $1.3 billion in the year-ago period.

OfficeMax said the precipitous sales decline immediately following the attacks translated into a same-store sales drop of 13 percent following the events of Sept. 11, compared with a 4 percent decline for the weeks leading up to that date. When combined, overall comp-store sales during the quarter decreased 7.9 percent.

OfficeMax reported a wider-than-anticipated net loss of $25.8 million in the third quarter, exacerbated by the events of Sept. 11, compared with $22 million in the same period last year.

On the positive side, "the company sales tempo has now returned to the levels experienced prior to the terrorist attacks," said Michael Feuer, chairman/CEO. "While this is encouraging, OfficeMax has yet to see evidence of meaningful improvement in higher-ticket capital goods, such as furniture and higher-end business machines," he said.

OfficeMax in the third quarter chose not to promote below-cost back-to-school commodity items as it had done in previous years. "Although by following this `not-selling-below-cost' strategy we may have lost the `cherry picker,' price-only customer, we were able to improve merchandise margin, which is margin recognized at the point of sale, by 130 basis points during the period," Feuer said. "We expect to follow this same roadmap for improved margins throughout the balance of this year and during fiscal 2002," he said.

Sales for the nine months decreased 9.6 percent, to $3.4 billion, down from $3.7 billion in the same period in 2000. Net loss for the nine months was $66.4 million, compared with a net loss of $48.2 million the previous year. Same-store sales declined 6.9 percent for the nine months.

OfficeMax said this year's capital expenditures will be reduced to $40 million to $45 million, down from the previously announced $50 million to $60 million.

The company also expects to reduce new store expansion next year by about 15 to 20 units. Almost all of these locations will be in existing OfficeMax markets.

Also, the company's advertising message and strategy for the gift-giving segment of the upcoming holiday season will focus on changing consumer sentiment, which is moving away from frivolous gift purchases toward more practical products, according to OfficeMax.

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