OfficeMax results an indicator of ongoing economic challenges

NAPERVILLE, Ill. — Not that anyone needed it, but weak second-quarter sales at OfficeMax provided additional evidence this week that the nation’s business climate remains exceedingly challenging.

The company’s sales of $1.647 billion were down a slight 0.3% from the prior year’s $1.653 and the company reported a loss of $3 million or 4 cents a share. The company’s profit performance included some non-recurring items, so it also reported adjusted earnings figures that showed net income of $6 million, or 7 cents a share, compared with net income of $10 million or 12 cents a share the prior year. On this basis, the market viewed the company’s performance favorably as analysts had forecast results to be even worse.

“We continued to experience top line softness as a result of the difficult macroeconomic environment but have made progress on gross margin initiatives,” said OfficeMax president and CEO Ravi Saligram. “We remain focused on executing the fundamentals better, enhancing the management team and improving the operations of the business.”

Even so, the company expects improvements to occur very gradually judging from guidance provided for the remainder of the year by CFO Bruce Besanko.

“Sales trends remain soft, with the July domestic total company year-over-year sales percentage decline slightly unfavorable compared to that of the second quarter,” Besanko said. “Accordingly, we continue to tightly manage expenses in this difficult environment.”

Based on the trends OfficeMax is seeing, the company anticipates total company sales for the third quarter will be comparable to the prior year but noted that total company sales for the second half of the year will be slightly higher than the prior year, due largely to the favorable impact of foreign currency translation and an extra week in this year’s fourth quarter.

The company’s sales difficulties stem from weak demand for business products at both the commercial and retail divisions. Contract segment sales of $880 million were essentially flat with the prior year, reflecting a 2.6% decline in the United States and a 5.7% international increase that includes the beneficial effects of foreign currency. When measured in local currency, the international piece of the commercial business declined 5.5%.

The U.S. decline reflects weaker sales from existing corporate accounts, according to the company.

Sales in the company’s 983 unit retail division decreased 0.7% to $767 million and same-store sales declined 0.5%. A decline in same-store sales in the United States was partially offset by stronger same-store sales in Mexico, the company said.

Contract segment income was $17.4 million compared with $19.4 million the prior year, while retail segment income was $8 million compared to $13.9 million.

Contract segment income was $17.4 million compared with $19.4 million the prior year, while retail segment income was $8 million compared to $13.9 million.