* 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 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
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
"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
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
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
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
"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
The company said it has about $547 million in available
credit under its revolver, which does not mature until July
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)