OfficeMax has ‘challenging’ Q1
NAPERVILLE, Ill. — Declines in technology product category sales and decreased foot traffic at its stores affected OfficeMax’s results for its fiscal first quarter ended March 30, 2013.
The company posted total sales of $1.8 million, down 5.7% from $1.9 in the first quarter of the year prior. Adjusted sales, which exclude the impact of changes in foreign exchange rates and of stores closed and opened as well as the difference in the number of business days in the quarter compared to the same quarter last year, decreased 4.3%. Operating income for the quarter was $102 million compared to $18 million in the first quarter of the year prior.
"We experienced a challenging first quarter, with a sales decline that reflected weak macroeconomic conditions and continued industry declines in technology sales," said Ravi Saligram, president and CEO of OfficeMax. "We will continue to drive gross margin improvement and have put in place a significant cost reduction plan that should improve results in the second half of the year."
Retail segment sales in the first quarter of 2013 decreased 7% to $845 million compared to the first quarter of 2012, reflecting a same-store sales decrease on a local currency basis of 5% primarily due to decreased traffic and lower technology product category sales. The decrease reflected a U.S. Retail operations same-store sales decrease of 6%, and a Mexico retail operations same-store sales decrease of 2% on a local currency basis.
Retail segment gross profit margin increased to nearly 30% in the first quarter of 2013 from 29% in the first quarter of 2012 due to higher customer margins driven primarily by a sales mix shift from the relatively lower margin technology category as well as less promotional activity and lower product costs from profitability initiatives, partially offset by deleveraging of occupancy costs due to lower sales and an expiration of favorable purchase accounting for leases. Retail segment operating, selling and general and administrative expenses as a percentage of sales were 28% in the first quarter of 2013 and 27% in the first quarter of 2012, primarily due to deleveraging of expenses due to lower sales. Retail segment income was $16 million, or 2% of sales, in the first quarter of 2013 compared to $23 million, or 3% of sales, in the first quarter of 2012.
In other noteworthy first quarter developments, the company opened its first OfficeMax Business Solutions Center. The new store format is a first of it kind for OfficeMax in the United States, and will offer 5,000 sq. ft. of specially tailored business services, solutions and products to help local entrepreneurs grow their businesses.
OfficeMax ended the first quarter of 2013 with a total of 936 retail stores, consisting of 846 retail stores in the U.S. and 90 retail stores in Mexico. During the first three months of 2013, OfficeMax closed five stores in the U.S., and opened one store and closed one in Mexico.