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OfficeMax Q1 Sales, Earnings Decline

Naperville, Ill. — OfficeMax reported a 79 percent drop in net income to $13.1 million, and a 17 percent decline in net sales to $1.9 billion, for the first quarter, ended March 28.

Excluding one-time charges and benefits, adjusted net income fell nearly 67 percent to $17.4 million.

In a statement, chairman Sam Duncan said the office-supply chain “continued to make improvements to our business and to contain costs,” which significantly benefited its performance during the quarter.

“Our efforts to streamline our business are enabling us to operate profitably and preserve cash and liquidity to carry us through this very challenging economic environment.”

Sales within the company’s retail segment fell 11.2 percent to $984.1 million for the three months and same-store sales declined 12.7 percent. The weakness was seen across all major product categories, OfficeMax said, and attributed it to reduced spending by consumers and small businesses during the quarter.

The chain stores’ gross margin decreased to 27.5 percent from 28.5 percent year over year due primarily to “de-leveraging of fixed occupancy costs from the same-store sales decrease and new stores” and a sales mix shift to lower-margin CE products, partially offset by improved margins in other categories.

Adjusted operating income fell 19 percent to $25.3 million.

During the quarter OfficeMax opened six U.S. stores, closed six others, and opened two in Mexico, giving it a total of 1,020 retail stores, including 939 in the U.S. and 81 in Mexico. The company expects to open up to 12 new stores and to close between 15 and 25 locations in total this year.

The company said sales trends worsened in April, compounded by the Easter holiday calendar shift, and is anticipating a sales decline for the full year given the projected weak economic outlook.

“We are committed to placing OfficeMax in a stronger position for when the macro economy and industry trends improve,” Duncan said, citing strict capital management and “important initiatives” in growth, differentiation and productivity. “We believe that all of our efforts will help us navigate the current environment and strengthen our business for the long term,” he said.