OFFICEMAX:BIGGEST NET INCOME IN 2 YEARS

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OFFICEMAX:BIGGEST NET INCOME IN 2 YEARS

 user 2006-10-30 at 10:13:00 am Views: 41
  • #16743

    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.