* Q1 EPS ex-items 39 cents vs Street's 21 cents
* Sees 2010 sales above last-year's levels
* Sees U.S. economy recovering more in the back half
* Says April sales weakness not a "hiccup" to growth
* Shares up 11 percent; lifts peers Staples, Office Depot
(Adds outlook, exec, analyst comments, background)
By Dhanya Skariachan
NEW YORK, April 29 OfficeMax Inc OMX.N beat
quarterly profit estimates and forecast higher 2010 sales as it
kept a tight lid on costs and saw its customers warm up to
spending on office supplies in an improving U.S. economy.
The results, which sent its shares up to their highest
level since June 2008, came just two days after larger rival
Office Depot Inc ODP.N reported weaker-than-expected
quarterly results and forecast a second-quarter operating loss.
The third-largest U.S. office supplies seller has been
gaining new customers and managing its costs tightly. Last
month, it shed light on a plan to boost sales in coming years
by offering more in-store services and taking its goods to
grocers, drugstores and mass merchants. [ID:nN04241641]
"OfficeMax has de facto become the No. 2 player in office
supply retailing behind Staples (SPLS.O). Office Depot's
first-quarter issues were due more to company-specific issues
than the underlying macroeconomic environment, which clearly is
improving," BB&T Capital Markets's Anthony Chukumba said.
The OfficeMax results bode well for industry leader
Staples, he said.
Shares of Office Depot and Staples stock were up about 2
percent on Thursday afternoon.
OfficeMax Chief Financial Officer Bruce Besanko said in an
interview that the company was seeing the U.S. economy recovering
more toward the back half of 2010.
It is seeing a gradual pick-up in sales of big-ticket items
like furniture and its customers warming up to the idea of
buying off-contract items after a long hiatus, Chief Operating
Officer Sam Martin told Reuters.
Its net profit rose to $24.8 million, or 29 cents a share
in the first quarter that ended on March 27, from $13.1
million, or 17 cents a share, a year earlier.
Excluding items, the profit was 39 cents a share, well ahead
of analysts' average estimate of 21 cents, according to Thomson
Sales edged up 0.3 percent to $1.92 billion, beating
expectations by a small margin.
Contract segment sales, which includes sales to its
business and government customers, rose 3.8 percent mainly on
strength in its international business.
Retail same-store sales fell 2.5 percent. But that was an
improvement over a 6.7 percent decline in the fourth quarter of
2009 and reflected favorable sales trends in the United States
Like its larger rival Office Depot, the company talked about
weakness in markets like California. CFO Besanko pointed out
Arizona and Nevada as other markets that were suffering. On a
regional basis, the U.S. Midwest performed better than others.
The company said it expects total sales in the second
quarter to be "slightly higher" than the prior-year period
mainly due to a foreign-exchange benefit, but warned that
quarter-to-date domestic sales were sequentially down from
COO Martin expects domestic sales trends to perk up in May
and June and said the weakness in April would not be a "hiccup
to any of our growth-driving initiatives."
(Reporting by Dhanya Skariachan; Editing by Derek Caney, Phil