UPDATE 3-OfficeMax 4th qtr profit disappoints; sees weak '09
* Q4 adj EPS 2 cents trails Street by 16 cents
* Q4 revenue below Street
* Expects 2009 sales to decline
* Shares up 0.7 pct (Recasts, adds CEO, analyst comments, stock action, byline)
By Ben Klayman
CHICAGO, Feb 18 (Reuters) - OfficeMax Inc OMX.N posted lower-than-expected quarterly results on Wednesday as small business and large corporate customers cut spending and the office products retailer also warned 2009 sales will fall.
The economic slump has taken a toll on office supply retailers, who depend on orders from their small-business customers.
FTN Equity Capital Markets analyst Anthony Chukumba said while the fourth quarter was a substantial miss, the company is protecting cash flow by cutting costs, such as renegotiating store leases.
"At the end of the day, as bad as 2008 was and as disappointing as the earnings were, I don't think that the company's ultimate survival should be in question," said Chukumba, who has a "neutral" rating on the stock.
Shares of OfficeMax initially fell as much as 15.8 percent to $3.51 after the weaker-than-expected results, but rebounded and were up 3 cents at $4.20 in midday trading on the New York Stock Exchange.
OfficeMax, which has suspended its dividend and cut staff in an effort to reduce spending, said it expects sales to decline in 2009 from the $8.27 billion it reported in 2008. Analysts polled by Reuters Estimates expect $7.73 billion.
"We're a victim of the economy," Chief Executive Sam Duncan said on a conference call. "As the economy goes, we go.
"The economy is really the key," he added later. "If the economy drops 5 points on GDP, then every company in the United States is going to have issues."
For the fourth quarter, OfficeMax reported a net loss of $396 million, or $5.21 a diluted share, compared with net income of $70.5 million, or 92 cents a share, a year earlier.
The quarter included a $429.1 million noncash charge for impairment of goodwill, trade names and store fixed assets. Excluding one-time items, OfficeMax earned 2 cents a share, below the 18 cents analysts had expected.
Naperville, Illinois-based OfficeMax, with 1,022 stores at the end of last year, said total sales fell 14.3 percent to $1.88 billion during the holiday quarter. Analysts had expected $1.94 billion.
Sales in the retail segment fell 9.7 percent, while same-store sales slid 13.6 percent. Sales in the contract segment, which includes corporate customers, fell 18.4 percent.
The company said it will look to expand sales in the middle market and use alternative approaches like its deal to sell products in Safeway (SWY.N) stores.
Duncan added that the company, which has also halted new-store construction and delayed its store remodel program until the economy improves, was confident in its cash position and access to capital to get it through the recession.
The company expects "significant" expense reductions as sales year-to-date were down slightly more than they were in the fourth quarter. Capital spending will fall to a range of $50 million to $70 million this year from $144 million in 2008.
"We believe (profit) estimates on the street need to come down to at least our $0.11 forecast for 2009 as OMX may be poised to post a loss in the upcoming year," JP Morgan analyst Christopher Horvers said in a research note.
Analysts expect a 2009 profit before one-time items of 69 cents a share.
OfficeMax expects cash flow from operations in 2009 to exceed capital spending, Duncan said. It also expects to have little or no borrowings outstanding at year end under its credit facility.
The company said it has about $547 million in available credit under its revolver, which does not mature until July 2012.
Its frozen pension plans are underfunded by $435 million, but federal requirements are expected to result in a minimum tax contribution of about $8 million in 2009, the company said. In the next couple of years after that, annual payments of between $50 million and $70 million, depending on market performance, are expected. (Editing by Dave Zimmerman) (Additional reporting by Dhanya Skariachan in Bangalore)