Officemax (NYSE:OMX)
Historical Stock Chart

From May 2019 to May 2024

OfficeMax Inc.'s (OMX) second-quarter loss narrowed on a year-earlier write-down, while sales and margins continued to fall amid weaker small-business and consumer spending.

Results topped analysts' views, however, sending shares soaring in early trading. Shares recently gained $1.03, or 14%, to $8.21.

The No. 3 office-supply retailer behind Staples Inc. (SPLS) and Office Depot Inc. (ODP) said it is "very cautious" about the second half of 2009. July sales in OfficeMax's retail segment have weakened slightly from the first and second quarters, and it expects sales to decline for the rest of the year.

The Naperville, Ill., company reported a quarterly loss of $16.9 million, or 23 cents a share, compared with a prior-year loss of $894.2 million, or $11.79 a share, a year earlier. Excluding restructuring impacts and the prior-year write-down, the company had a 4-cent loss, while year-earlier earnings would have been 24 cents.

Revenue declined 16.5% to $1.66 billion as same-store sales dropped 12%, with drops across all major product categories. Business-to-business sales in its contract segment fell 21% following weaker spending by existing U.S. corporate accounts and negative effects from foreign-currency exchange at its international contract business.

Analysts polled by Thomson Reuters expected a loss of 7 cents a share on revenue of $1.64 billion.

OfficeMax Chairman and Chief Executive Sam Duncan said the company's efforts to streamline and boost its financial position "significantly helped" performance, but the macroenvironment is masking achievements in the core business.

Gross margin fell to 23.8% from 24.4%.

In an interview, Chief Financial Officer Bruce Besanko played down the importance of the July sales trends, noting the month is typically among the weakest of the year for office supplies. "You can't read much into it," he said. He said OfficeMax is planning for a soft back-to-school season, in part because many school systems are returning later, but so far, it hasn't seen anything surprising relative to its plans.

Like other retailers, OfficeMax is seeing more pressure on its retail business in the West and Southeast.

"All businesses are suffering from the broader macro-environment," he said. "OfficeMax is continuing to make progress despite the tough economy. We maintain a very solid balance sheet, and we'll continue to make the decisions that benefit liquidity and cash flow."

OfficeMax cut costs by $50 million during the quarter and ended the period with $296 million in cash and equivalents, more than twice the level at the end of the first quarter. It has not borrowed against a $700 million asset-backed credit facility that matures in 2012, Besanko said.

Office-supply retailers have seen revenue evaporate along with consumer spending and orders by business customers. As such, OfficeMax has suspended its quarterly dividend, eliminated jobs and delayed its store-remodeling program until economic conditions improve.

OfficeMax has 1,012 retail stores, with plans to open 12 and close up to 25 this year. The company cut its capital spending forecast for the year, to a range of $40 million to $50 million from an April 30 projection of $50 million to $70 million.

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com

(Kerry Grace Benn and Jenny Park contributed to this report.)