Same-store sales for the company's retail division in the fourth quarter increased 0.4% compared with the same quarter a year before. Still, for the fourth quarter of 2004, OfficeMax Retail saw an operating loss of $16.9 million, compared with operating income of $6.1 million in the Q4 2003 and $26.8 million, after a restatement, in the third quarter of 2004.
These have been trying times recently for the number-three office supply retailer, which was bought in December 2003 by Boise Cascade Corp., a major paper company, for $1.2 billion (in 2004 the company sold its paper and forest products businesses, and assumed the name OfficeMax Inc.). In early 2005, the company sacked six employees for sending $3.3 million in bogus bills to a supplier. The scandal delayed release of OfficeMax's Q4 earnings report, initially due in January, and obligated the company to restate its net earnings by more than $4 million for the first nine months of 2004.
The scandal cost the CEO Christopher Milliken his job last month, and CFO Brian Anderson quit last fall after only a couple of months in the post. On Friday of last week, Capital Partners LLC, an investment firm that owns about 6.2% of OfficeMax, filed documents with the SEC stating that it believes that a breakup or other strategic alternative would be the best way to maximize OfficeMax-shareholder value.
"We recognize that our office products business in 2004 fell well short of our expectation," said interim CEO George Harad (who took the post last month), during Monday's earnings conference call. "During the course of the year, we lowered our investors' guidance twice, and our actual performance didn't meet that lower guidance."
According to Harad, the weakness in the retail sales was especially evident in the back-to-school and holiday periods. "We also had increased promotional expenses and lower vendor income," he noted. Still, he added, "we remain on track in 2005 to open new retail stores for the first time in a while, though we have reduced our target from 50 to 40."
Regarding the future of OfficeMax as a company, Harad discounted the idea of selling it off as pieces. "Our directors of have given considerable thought to the company's strategy," he said. "Now is not the time—and it's a particularly inopportune time—to change direction, given the multiple elements of our plan already under way. Progressing with the current plan seems to be best for now. At the same, we're not ruling out consideration of other alternatives in the future."
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