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OfficeMax Q4 Profits Plunge 76%

2/23/2012 10:21:26 AM Eastern

Naperville, Ill. - One-time charges contributed to a 76 percent
decline in fourth-quarter profits for OfficeMax.

The No. 3 office-supply chain said net income for the three
months, ended Dec. 31, was $2.9 million on a 3.9 percent gain in net sales, to
$1.8 billion.

Results reflect one additional week of operation in the U.S.,
plus $17.8 million in pretax charges for severance pay and impairment of
certain U.S. stores.

The chain closed 22 U.S. locations last year.

Within its retail segment, comprised of 896 U.S. and 82 Mexican stores,
sales rose 5.7 percent to $901 million and comp-store sales edged up 0.2
percent, reflecting a slight decline in U.S. comps.

Inventory markdowns, higher fuel costs and increased promotional
activity to drive holiday traffic led to a 3.2 percent decline in gross profit
margin, to 26.9 percent, and retail segment income fell 30 percent to $13.2
million, or 1.4 percent of sales, compared with 2.2 percent of sales during the
year-ago quarter.

 "Sales trends improved in
the fourth quarter but remain soft," noted Bruce Besanko, executive VP and
chief financial and administrative officer. "Consequently we will continue to
streamline our cost structure, enabling us to make strategic investments in
initiatives that will jump-start growth."

For the full year, profits fell 52 percent to $32.8 million, and
net sales slipped 0.4 percent to $7.1 billion.

Looking ahead, the company is projecting flat first-quarter net sales,
and is planning capital expenditures of upward of $100 million in 2012 for IT,
e-commerce and infrastructure upgrades.

OfficeMax announced in November that it would begin tests of in-store
mobile departments
that are staffed and operated by RadioShack. A pilot
program was scheduled to begin last month in about 15 to 20 stores within the
San Francisco market.