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OfficeMax Inc. Reports Operating Results (10-Q)

November 06, 2012 | About:
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10qk

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OfficeMax Inc. (OMX) filed Quarterly Report for the period ended 2012-09-29.

Officemax Inc has a market cap of $636.7 million; its shares were traded at around $8.72 with a P/E ratio of 9.6 and P/S ratio of 0.1. The dividend yield of Officemax Inc stocks is 1.1%.

Highlight of Business Operations:

Sales for the third quarter of 2012 decreased 1.7% year-over-year to $1,744.6 million, while sales of $5,219.9 million for the first nine months of 2012 decreased 1.2% year-over-year. Fiscal year 2011 contained an extra week for our domestic businesses which resulted in a shift in the calendar weeks that are included in each years fiscal quarter. After adjusting for the impact of the change in foreign exchange rates, the impact of stores closed and opened during 2011 and 2012 and this shift in weeks for our U.S. businesses, sales for the third quarter of 2012 decreased 1.2% year-over-year, and sales for the first nine months of 2012 decreased 0.2% year-over-year. Gross profit margin increased 0.5% of sales (50 basis points) to 26.4% of sales in the third quarter of 2012, and 0.2% of sales (20 basis points) to 25.9% of sales in the first nine months of 2012, compared to the same periods of 2011. The increase in the third quarter was due to lower occupancy expense and higher customer margins, while the increase in the first nine months was due to lower occupancy expense, which was partially offset by higher delivery expense and lower customer margins. Operating, selling and general and administrative expenses declined during the third quarter and first nine months of 2012, compared to the same periods of 2011. As a percentage of sales, expenses increased for the third quarter of 2012 compared to the third quarter of 2011, but declined for the first nine months of 2012 compared to the first nine months of 2011. The declines year-to-date were primarily due to lower payroll expense, lower depreciation and equipment lease expense, lower credit card processing fees and lower advertising expense, which were partially offset by increased incentive compensation expense. We reported operating income of $33.5 million and $74.4 million in the third quarter and first nine months of 2012, respectively, compared to operating income of $41.3 million and $73.9 million for the third quarter and first nine months of 2011, respectively. As noted in the discussion and analysis that follows, our results in some periods were impacted by significant items such as charges for store asset impairments, store closures and severance. If we eliminate the significant items recorded in operating income from the applicable periods, our adjusted operating income was $44.9 million and $111.1 million for the third quarter and first nine months of 2012, respectively, and $41.3 million and $87.8 million for the third quarter and first nine months of 2011, respectively.

Sales for the third quarter of 2012 decreased 1.7% (0.9% on constant currency basis) year-over-year to $1,744.6 million, while sales of $5,219.9 million for the first nine months of 2012 decreased 1.2% (0.7% on a constant currency basis) year-over-year. Fiscal year 2011 contained an extra week for our domestic businesses which resulted in a shift in the calendar weeks that are included in each years fiscal quarter. After adjusting for the impact of the change in foreign exchange rates, the impact of stores closed and opened during 2011 and 2012 and this shift in weeks for our U.S. businesses, sales for the third quarter of 2012 decreased 1.2% year-over-year, and sales for the first nine months of 2012 decreased 0.2% year-over-year. In our Retail segment, same-store sales declined 2.1% in local currencies in the third quarter of 2012, compared to the third quarter of 2011, and declined 1.5% in local currencies for the first nine months of 2012 compared to the first nine months of 2011. In our Contract segment, sales decreased 0.3% for the third quarter of 2012 compared to the third quarter of 2011 and increased 1.2% for the first nine months of 2012 compared to the first nine months of 2011. Contract segment sales for both periods reflected increases in U.S. sales and decreases in international sales compared to the prior year periods.

Contract segment sales decreased 0.3% year-over-year for the third quarter of 2012 to $880.9 million. Sales for the first nine months of 2012 of $2,720.3 million increased 1.2% year-over-year. U.S. sales increased 3.9% and 4.0% year-over-year for the third quarter and first nine months of 2012, respectively. For the third quarter of 2012, sales to newly acquired customers continued to outpace reduced sales due to lost customers, but were partially offset by a decline in sales to existing customers. International sales declined 8.9% year-over-year for the third quarter of 2012 (7.2% in local currencies) and declined 4.7% year-over-year for the first nine months of 2012 (3.9% in local currencies) due to lower sales to existing customers.

Retail segment sales decreased by 3.1% year-over-year to $863.7 million for the third quarter of 2012 and by 3.7% year-over-year to $2,499.6 million for the first nine months of 2012, in both cases reflecting store closures, reduced store transactions and weaker technology product category sales. U.S. same-store sales declined 2.6% and 1.8% year-over-year for the third quarter and first nine months of 2012, respectively, in both cases primarily due to lower store transactions partially offset by higher average ticket amounts compared to the same periods of 2011. Mexico same-store sales increased 2.2% and 2.1% year-over-year on a local currency basis for the third quarter and first nine months of 2012, respectively. We ended the third quarter of 2012 with 960 stores. In the U.S., we closed 25 retail stores during the first nine months of 2012 (none in the third quarter), and opened one (none in the third quarter), ending the quarter with 872 retail stores. Grupo OfficeMax, our majority-owned joint venture in Mexico, opened seven stores during the first nine months of 2012 (three in the third quarter), and closed one during the first nine months of 2012, (none in the third quarter), ending the quarter with 88 retail stores.

Retail segment operating, selling and general and administrative expenses increased $1.6 million for the third quarter year-over-year but decreased $7.8 million for the first nine months of 2012 year-over-year. Retail segment operating, selling and general and administrative expenses as a percentage of sales increased 1.0% of sales year-over-year to 26.8% of sales for the third quarter of 2012 and increased 0.7% year-over-year to 27.5% of sales for the first nine months of 2012 due to the deleveraging impact of lower sales. Expenses were higher in the third quarter of 2012, year-over-year due to higher incentive compensation expense and higher advertising costs, partially offset by lower credit card processing fees and lower depreciation and equipment lease expense. Expenses were lower in the first nine months of 2012, year-over-year due to lower credit card processing fees and lower depreciation and equipment lease expense, partially offset by higher incentive compensation expense. Incentive compensation expense was $2.1 million higher in the third quarter of 2012 than the third quarter of 2011 and $8.2 million higher in the first nine months of 2012 than in the first nine months of 2011.

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