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OfficeMax Q1 profits drop on store closing costs

NAPERVILLE, Ill. — Charges related to store closures in the United States caused OfficeMax's first quarter net income to drop from $4.9 million, or 6 cents per diluted share, compared with $11.4 million, or 12 cents per diluted share, in the first quarter of 2011. Adjusting for these charges, net income for the quarter was $20.3 million, or 23 cents per diluted share, compared with $11.4 million, or 13 cents per diluted share for the same period last year.

Total sales were $1.9 billion in the first quarter of 2012, an increase of 0.5% from the first quarter of 2011.

"We are off to a good start in 2012 and the team delivered solid first quarter results," said Ravi Saligram, president and CEO of OfficeMax. "We are making steady progress in executing the early stages of our strategic plan."

Sales at OfficeMax's retail segment were down 2.7% to $912.3 million in the first quarter of 2012 compared to the first quarter of 2011, reflecting a same-store sales decrease of 2.1% due to reduced store transactions.

OfficeMax ended the first quarter of 2012 with a total of 958 retail stores, consisting of 874 retail stores in the United States and 84 Retail stores in Mexico. During the first quarter of 2012, OfficeMax closed 23 stores in the United States and opened one store in the United States and two stores in Mexico.

The company's contract segment performed better than the retail segment, achieving a 3.8% sales increase to $960.6 million in the first quarter of 2012 (an increase of 2.8% on a local currency basis). Contract segment income was $27.1 million, or 2.8% of sales, in the first quarter of 2012 compared to $9 million, or 1% of sales, in the first quarter of 2011.

For the second quarter 2012, OfficeMax is expecting total sales to be flat to slightly lower than the prior year quarter.

For the full year 2012, sales are expected to be flat to slightly higher than the prior year. The company also anticipates a net reduction in retail store count for the year with up to 35 store closures and one to two store openings in the United States, as well as eight to 10 store opening and one to two store closures in Mexico.

Bruce Besanko, EVP, CFO and chief administrative officer of OfficeMax, said, "Our more positive full year outlook is reflective of the traction we're gaining on initiatives, as well as our continued focus on cost control."

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