OfficeMax Records Q4 Retail Operating Loss

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Itasca, Ill. — Weak holiday and pre-school sales led to a fourth-quarter loss at OfficeMax, which was partially offset by a pretax $280.6 million gain from the sale of its paper/forest products business.

The retail segment of OfficeMax reported sales of $1.2 billion in the fourth quarter of 2004, compared with sales of $283.2 million for the 17 days in December 2003 the company owned OfficeMax Inc. Same-store sales increased less than 1 percent. (OfficeMax was purchased in the fourth quarter of 2003 by Boise Cascade, thus the short quarter. A year later Boise Cascade sold its forest products segment and combined its Building Solutions Segment with OfficeMax Retail. At that time, the Boise Cascade name disappeared, with the OfficeMax name becoming dominant.)

In the fourth quarter, ended Dec. 31, OfficeMax Retail reported an operating loss of $16.9 million, compared with operating income of $6.1 million in the fourth quarter of 2003. Operating margin for the fourth quarter was 1.5 percent, compared with 2.2 percent in the same three months in 2003.

The retailer attributed its low profitability level in 2004 to weaker-than-expected sales, especially during back-to-school and holidays, which led to reduced margin dollars, lower vendor income and a higher expense ratio as a percentage of sales. The retail segment’s profitability also was negatively impacted by greater promotional sales at low or no profitability.

For the 12 months, OfficeMax Retail recorded sales of $4.5 billion, compared with the $283.2 million for partial year ownership in 2003. Operating income for the 12 months reached $22.7 million, compared with $6.1 million in 2003. Full-year operating margin was less than 1 percent, compared with 2.2 percent the previous year.

Consolidated fourth-quarter sales came in at $2.7 billion, an increase of 14 percent from the $2.4 billion recorded in the fourth quarter of 2003. The sales increase was due mainly to the acquisition of OfficeMax Inc. in December 2003, as well as strong same-store growth in the OfficeMax Contract segment.

Consolidated net income in the fourth quarter hit $700,000. Before the net impact of the sale of its paper, forest products and timber assets, OfficeMax reported a fourth-quarter net loss of $24.2 million.

By comparison, fourth quarter 2003, net income hit $6.9 million, and before the impact of asset sales, it was $15.9 million.

For the 12 months, consolidated sales reached $13.3 billion, an increase of 61 percent over the previous year’s $8.2 billion.

In the 12 months, OfficeMax reported net income of $173.1 million, compared with a year-ago $8.3 million. Prior to asset sales, net income climbed to $83.2 million in 2004, up from a year-earlier $29.3 million.


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