OfficeMax posts 2Q profit but revenue flat, expects revenue erosion in 3Q, full year

OfficeMax posts 2Q profit, expects revenue dip

NAPERIVLLE, Ill. — OfficeMax Inc. reported a higher-than-expected profit for the second quarter compared with a loss a year ago, but the office supply retailer said the economy continued to weigh on results and forecast slight revenue declines for the third quarter and full year.

Shares fell more than 13 percent by midday on the disappointing outlook.

CFO Bruce Besanko said the company continues to deal with the uncertain economy and weak U.S. employment, which has caused both consumers and small businesses to remain cautious on spending.

But there were some bright spots, he told the Associated Press in a telephone interview.

Shoppers bought more high tech items, such as personal computers, and furniture sales, particularly office chairs, showed signs of improvement.

He predicted a “tough environment” for the back to school period, with same level of competitive discounts and markdowns as last year.

“Shoppers are going to be very budget conscious,” he said.

OfficeMax expects third-quarter revenue to be “slightly” lower than the prior year’s third-quarter revenue of $1.8 billion. Analysts expect $1.86 billion.

For the full year, the company expects revenue “flat to slightly lower” than the $7.21 billion in 2009. Analysts expect $7.29 billion.

OfficeMax reported net income of $11.8 million, or 14 cents per share, for the three months ended June 26 compared with a loss of $17.7 million, or 23 cents per share, a year ago. Excluding related to store closings and a lease agreement, earnings totaled 12 cents per share.

Revenue edged down less than 1 percent to $1.65 billion from $1.66 billion last year.

Analysts polled by Thomson Reuters expected earnings to be break-even per share on revenue of $1.67 billion. They typically exclude one-time items from their earnings estimates.

Revenue in stores open at least one year edged down 0.3 percent.

“While the economy appears to be recovering more slowly than we had previously expected, we are well positioned to achieve our 2010 and long-term financial objectives,” said CEO Sam Duncan.

Janney Capital Markets analyst David Strasser said in a note to investors that part of the lower guidance appears to be a slower start to the back to school season.

“We are big believers in the OMX story, but believe that headwinds of the economy persist, despite our hope that they would moderate,” he wrote in a note to investors.

OfficeMax operates about 1,001 retail stores, including 923 in the U.S. and 78 retail stores in Mexico.

Shares fell $1.95, or 13.1 percent, to $12.90 in midday trading. The stock has traded between $9.30 and $19.79 during the last year.