OfficeMax sees tough back-to-school

NEW YORK Wed Jun 23, 2010 7:07pm EDT

Sam Martin, executive vice president and chief operating officer for OfficeMax, speaks at the 2010 Reuters Consumer and Retail Summit in New York, June 23, 2010. REUTERS/Brendan McDermid

Sam Martin, executive vice president and chief operating officer for OfficeMax, speaks at the 2010 Reuters Consumer and Retail Summit in New York, June 23, 2010.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - OfficeMax Inc OMX.N expects the back-to-school season to be tough, even as school districts load more of their purchases onto parents, a top company executive said on Wednesday.

As U.S. state budgets contract, parents are being asked to add more items to their children's back-to-school shopping list, and that is adding somewhat to sales, Chief Operating Officer Sam Martin said on Wednesday at the Reuters Consumer and Retail Summit in New York

"Markers, chalk, tissues, paper towels ... they are trying to put more of this on the personal list," Martin said.

Even OfficeMax's corporate clients are not ready to abandon their austere ways yet.

"What businesses learned in this deep recession is not going to leave their mind-set very quickly..." Martin said.

The company said it continues to see weakness in markets in the U.S. Southwest like California, Arizona and Nevada.

Chief Financial Officer Bruce Besanko noted that the No. 3 U.S. office supplies retailer had forecast in April slightly higher consolidated sales in the current second quarter than in the year-ago period, helped by foreign exchange rates.

"We can survive on low-single-digit negative comps for a long time, but that's not what we want to do," Besanko said. "We want to grow."

Chief Executive Sam Duncan is set to retire next February. Martin said OfficeMax should have a successor by then.

Shares of the company closed up 22 cents, or 1.45 percent, to $15.38 on Wednesday.

ECONOMIC BAROMETER

Many investors see office supply retailers as barometers of economic health, since demand for their products is closely tied to white-collar employment rates.

While U.S. joblessness remains high, Martin downplayed the chance of a double-dip recession.

"We never thought it would be a smooth slow steady move up ... We will be up and down, up and down, up and down, with the general (move being) up over the year," he said.

In an effort to boost its market share against larger rivals Staples Inc (SPLS.O) and Office Depot (ODP.N), OfficeMax is taking its products beyond traditional superstores.

After estimating that about 90 percent of office supplies are not sold in dedicated stores, OfficeMax is now selling merchandise in drugstores, grocers like Safeway (SWY.N), mass merchants and independent retailers.

Earlier this year, the company said it had won a contract to sell office products in Food Lion stores, owned by Belgian retailer Delhaize Group (DELB.BR).

OfficeMax also sees opportunities to win new customers Staples continues to focus on migrating clients from a merger with Corporate Express.

"We feel like there have been opportunities to take market share," Besanko said.

(Reporting by Nivedita Bhattacharjee and Dhanya Skariachan; Editing by Michele Gershberg, Lisa Von Ahn, John Wallace and Carol Bishopric)

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