UPDATE:OfficeMax Profit Boosts Stock Despite Revenue Caution
29 10월 2010 - 2:23AM
Dow Jones News
OfficeMax Inc.'s (OMX) third-quarter profits more than tripled
from a year ago on better margins that more than offset soft sales,
sending its shares as much as 17% higher even though it struck a
cautious tone about the rest of the year.
The office-supply chain said consumers were budget conscious
during the back-to-school season, while at the same time retailers
were very competitive and promotional. Customers have are more
thrifty with their purchasing habits as a result of the recent
recession, Chief Financial Officer Bruce Besanko said on a
conference call to discuss the fiscal third quarter, and those
habits may be here for the long term.
Outgoing OfficeMax Chairman and Chief Executive Officer Sam
Duncan in a press release said it expects the macroeconomic
environment will "remain muted" for the rest of the year, but
Besanko said financial discipline will allow it to achieve its 2010
goals. Total sales for the fourth quarter have so far lagged last
year, and the company anticipates that will remain the case during
the balance of the period. However, Besanko said on the call, it
doesn't see the U.S. facing a "double-dip" recession.
Rival Office Depot Inc. (ODP) on Wednesday reported a surprise
profit where analysts expected a loss, thanks to its own cost cuts
and margin improvements, but its revenue was similarly softer than
views. The results suggest the sector may not yet have hit bottom,
but the companies are better managing their costs in response.
Both chains are handing over the reins to new management, with
OfficeMax Chairman and Chief Executive Duncan stepping aside next
month per a decision announced in February. Ravi Saligram, formerly
of food-service concern Aramark Corp., will become CEO and
OfficeMax director Rakesh Gangwal will become chairman. Duncan on
the call said Saligram was a perfect choice to head the company and
predicted the new CEO will do a great job.
Office Depot Chairman and CEO Steve Odland, who along with his
company recently settled alleged fair-disclosure violations with
the Securities and Exchange Commission, is leaving and a longtime
director will take the roles on an interim basis until a
replacement is found. Office Depot on Wednesday said the mutual
decision to part ways was unrelated to the SEC settlement.
For the year, OfficeMax sees a reduction in store count as it
plans to open two stores in Mexico and close about 15 locations in
the U.S.
Office Depot Wednesday said its Mexican business will grow in
Mexico and other countries through an acquisition, but its interim
leader said its U.S. store base is aging and too large.
The struggling U.S. economy has hurt both companies, but
OfficeMax used the opportunity to cost cut and improve its
profitability while Office Depot until recently had a hard time
doing the same. Office Depot's struggles have its shares off 21% in
the past year while OfficeMax has seen a 67% run up in its stock,
pushing OfficeMax ahead of Office Depot to occupy the number-two
spot in terms of market capitalization at about $1.44 billion.
Industry giant Staples Inc. (SPLS) is far ahead at over $15
billion.
Gross-profit margins increased for OfficeMax at both its
contract and retail businesses, and its overall
adjusted-operating-income margin rose to 2.3% from 1.5% a year
ago.
The tonic effect OfficeMax results had on its stock didn't do
much for the shares of Office Depot or Staples (SPLS). OfficeMax
stock pulled back from early session highs to trade up 15% at
$17.09 apiece, while Office Depot was off 2.3% at $4.65 and Staples
was up just 0.54% in recent Thursday trading.
-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171;
maxwell.murphy@dowjones.com
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