OMX Officemax Incorporated

OfficeMax Inc. (OMX), the provider of office supplies, and technology products and solutions, recently consolidated its two existing credit lines into one. The new revolving credit facility of $650 million that is scheduled to expire in October 2016 overrides the existing $700 million and the other C$60 million (approximately $59 million in U.S.) credit facility, which were slated to conclude in July 2012.

Management notified that currently there are no borrowings under the credit facility in which seven financial firms were involved with Wells Fargo Capital Finance, Merrill Lynch, Pierce Fenner & Smith, and J.P. Morgan Securities playing the lead.

Let’s have a Brief Look on the Company

OfficeMaxis repositioning itself to keep afloat in a difficult consumer environment. The company is containing costs, closing underperforming stores and focusing on innovative products and services, which should all contribute to margin improvements. Further, the company also anticipates regaining operating margins of more than 3.8% by 2015.

The company also focuses on optimal store sites in order to boost store productivity. OfficeMax is also committed to improving sales per square foot by increasing customer traffic and converting them into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives. The company has initiated control center technology services to assist customers with PC maintenance or removal of viruses.

However, challenging macroeconomic conditions are making the business environment tough for retailers of office supplies such as OfficeMax, Office Depot Inc. (ODP) and Staples Inc. (SPLS).

As the demand for office products is closely tied to the health of the economy, consumers and small businesses remain frugal about big-ticket items like business machines and other durables.

Consequently, OfficeMax lowered its third-quarter 2011 sales outlook in the backdrop of sluggish back-to-school sales and soft technology demand. The company now expects third-quarter 2011 sales to be marginally lower than the comparable period, including the positive impact of foreign currency translation. Earlier, management had guided third quarter sales to remain flat with the prior-year quarter. The company had posted revenue of $1,813.4 million in third-quarter 2010.

Let’s Conclude

Business budgets remain tight, consumers remain more cautious than ever before and companies are trying hard to navigate through the difficult environment. Going by the pulse of the economy and given the pros and cons, we prefer to have a long-term “Neutral” rating on the stock. Moreover, OfficeMax holds aZacks #3 Rank, which translates into a short-term ‘Hold’ rating that correlates with our long-term view.

 
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