Naperville, Ill. - OfficeMax said a stabilizing economy and its growth and earnings strategy yielded big profits for the office-supply chain during its fiscal first quarter.
Net income soared 88 percent to $24.8 million for the three months, ended March 27, but weakness in its retail operations, which offset rising B-to-B revenue, produced flat net sales of $1.9 million for the period.
Indeed, retail sales slipped 3 percent to $954.3 million, reflecting a comp-store sales decline of 2.5 percent and the closure of seven U.S. stores during the quarter. The chain attributed the comp-sales decline to "a continued weak market environment," although comps improved from last year's 6.7 percent decrease, reflecting favorable sales trends in the U.S. and Mexico, OfficeMax said.
Conversely, retail income rose 39 percent to $38.8 million due to higher product margins, which stemmed from less aggressive discounting and increased private-label sales. Expenses rose 1.1 percentage points due primarily to higher incentive compensation, the company said.
In a statement, chairman/CEO Sam Duncan said OfficeMax is gaining traction from its five-year strategic growth plan, which calls for expanding the core business, pursuing opportunities in adjacent markets, and enhancing infrastructure to support growth.
U.S. sales declines are continuing in the current quarter, the company said, as it faces "near-term headwinds from challenging macroeconomic conditions" such as U.S. unemployment trends.
"While we expect the road to recovery will not be smooth, we are optimistic about our future," Duncan noted.