OfficeMax Executives Interested In Top Job, But Focused On Growth

Two of the key executives in the running for the top spot at OfficeMax Inc. (OMX) say they are keeping it all business as the office-products retailer enters fiscal 2010 seeking both expansion and a new leader.

Bruce Besanko, chief financial officer and chief administrative officer; and Sam Martin, chief operating officer and executive vice president, talking for the first time since Chairman and Chief Executive Sam Duncan announced his planned departure last week, are tasked with steering the No. 3 office products retailer by sales with a steady hand.

Duncan's decision "was a strictly personal one," Besanko said. Duncan's family is on the West Coast, while OfficeMax is based in Chicago.

"We are focussed on what we have in front of us, but certainly we would have interest should that opportunity present itself," Martin said of the top spot.

OfficeMax's board said it plans to launch a national search for a new CEO, and Duncan will stay on until a successor is in place.

But it remains business as usual, with OfficeMax having big plans for 2010 after being buffeted by the recession for the past couple of years.

The retailer on Wednesday said its fourth-quarter loss narrowed on much smaller write-downs than a year ago and core operations swung to a narrower-than-expected loss, as sales declines eased. The company expects to post sales growth in 2010, an upbeat projection compared with analysts' estimates for 1.7% sales decline, according to Thomson Reuters.

OfficeMax in the fourth quarter was able to improve its gross margin, which aids earnings, for the first time in at least a year, to 24.4% from 24.2%, driven by strong international progress as it was able to pass on certain cost increases while being assisted by favorable foreign exchange rates.

Average purchases are showing signs of improvement, but are still down from a year ago, and same-store sales declines are mitigating, Martin said.

OfficeMax is finding that "business spending is a little different than it was a year ago," Besanko said. Retail customers and businesses are "replacing consumables" like paper, pens and paper clips as their supply closets become empty after a year of curtailed spending. The upgrade late last year to Windows 7 also helped business, the executives said.

While OfficeMax is still promotional when it comes to trying to move products, it has not upped its discounts and is finding that retail customers are beginning to accept the prices on items like chairs and furniture. "People want to replace things that have become worn or broken," Martin said.

Since OfficeMax is opening only two stores this year, on the low end of its traditional rate of growth, the retailer is pushing "productivity," which will be a word heard often this earnings season as retailers have made just about all the cuts they can and now must get more out of remaining their people and systems.

One plan is to make its call center more efficient, a general business move. But OfficeMax is also adding some pizzazz, becoming "more fashion forward," Besanko said.

The retailer has private label lines aimed at women, like file folders with colorful designs and stylish desktop accessories, Martin said.

The perennial question of whether OfficeMax will merge with competitors Staples Inc. (SPLS) or Office Depot Inc. (ODP) is lately being shrugged off. "We are focused on running our business and creating value for shareholders," Besanko said.

OfficeMax posted a fourth-quarter loss of $3.24 million, or 4 cents a share, compared with a prior-year loss of $396 million, or $5.21 a share. Excluding write-downs and other items, the company had a 3-cent loss in the latest quarter, versus a year-earlier profit of 2 cents.

Revenue decreased 3.9% to $1.81 billion as same-store sales dropped 6.7%. Analysts surveyed by Thomson Reuters predicted a 7-cent loss on $1.73 billion in revenue.

Sales at OfficeMax's contract segment--its business-to-business office-products distributor--dropped 0.6%, or 6.2% excluding currency changes.

OfficeMax shares were recently up 4.9% to $15.45 after reaching a 52-week high of $15.74 earlier in the session. The stock hit an all-time low in March and has more than tripled in value in the past year.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

Officemax (NYSE:OMX)
Historical Stock Chart
From Jul 2024 to Jul 2024