[Anonymous]

OfficeMax posts biggest net income in two years
OfficeMax
Inc., the third-largest U.S. office-supplies retailer, posted its
biggest profit in two years after limiting discounts and adding
corporate customers.Third-quarter net income was $31.4 million, or 41
cents a share, exceeding analysts’ estimates. Naperville,
Illinois-based OfficeMax lost $3.87 million a year ago. Sales fell 1.9
percent to $2.24 billion, the company said in a statement today.Chief
Executive Officer Sam Duncan, who took over in April 2005, returned the
company to profitability this year after five quarters of losses.
Duncan is adding corporate clients, introducing exclusive products such
as Tul pens and discounting less as he tries to catch Staples Inc. and
Office Depot Inc.“So far the strategy is working,” said Arun Daniel,
who helps manage $40 billion including Office Depot shares at ING
Investments LLC in New York Shares of OfficeMax, which operates 884
stores, rose 59 cents, or 1.3 percent, to $46.12 at 10:15 a.m. in New
York Stock Exchange composite trading. The stock was up 82 percent this
year through yesterday, compared with a 14 percent increase for Staples
and a 34 percent gain for Office Depot.OfficeMax had costs of $11.5
million in the quarter to move its headquarters to a new Naperville
site and $7.9 million to cut jobs at a unit that sells office supplies
to businesses. Excluding those expenses, the company earned 56 cents a
share.Gary Balter, an analyst at Credit Suisse, estimated profit of 53
cents. He is the top OfficeMax analyst ranked by Institutional Investor
magazine and has an “outperform” rating on the stock.His projection
was 2 cents lower than the 55-cent average estimate of seven analysts
surveyed by Thomson Financial, which doesn’t disclose the basis for its
estimates to Bloomberg News.“They’ve posted some decent earnings,”
said John Buckingham, who oversees about $825 million, including
OfficeMax shares, at Al Frank Asset Management in Laguna Beach,
California. “It seems things are on the right track.”The company is
becoming more profitable. OfficeMax today said full-year operating
income as a percentage of sales will be “in the middle” of its
previously forecast range of 3 percent to 3.5 percent, excluding some
items.Earlier this year, it was predicting as much as 2.25 percent.
Operating income is sales minus the cost of goods sold and selling,
general and administrative expenses.Sales at OfficeMax stores declined
5 percent after Duncan closed 109 underperforming locations during the
first quarter. Sales at stores open at least a year were unchanged as
the company eliminated mail-in rebates on electronics, giving them at
check-out. The company also limited clearance items.Revenue at the unit
that sells office supplies to companies rose 1.2 percent to $1.16
billion, and profit also increased. OfficeMax added more small- and
medium-sized business customers, improved international sales and
reduced operating expenses.Gross margin, or the amount of sales left
after subtracting the cost of goods sold, widened to 26 percent of
sales from 24 percent. The company expanded copying and printing
services, which tend to be more profitable than selling
supplies.Duncan, 54, succeeded Christopher Milliken, who resigned after
an internal investigation discovered the company faked $3.3 million in
rebates billed to suppliers.Office Depot last week posted third-quarter
net income $133.3 million, beating analysts’ estimates, as sales
increased the most in nine quarters. It lost money a year earlier.
Staples, the world’s largest office-supplies retailer, will report
results next month.Of eight analysts who have covered OfficeMax in the
past year, two say “buy” and five rate them a “hold,” and one says
“sell.” Prior to today, OfficeMax earnings have beaten analysts’
estimates in the past two quarters. 

[Author]

October 30, 2006 at 10:17 AM