Reuters: Global Markets: OfficeMax profit tops Street; shares rise

Reuters: Global Markets Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

OfficeMax profit tops Street; shares rise May 8th 2012, 15:56 By Dhanya Skariachan NEW YORK | Tue May 8, 2012 11:56am EDT NEW YORK (Reuters) - OfficeMax Inc (OMX.N) reported a better-than-expected quarterly profit, showing that the third-largest U.S. office supply chain's decision to cut costs by closing or shrinking stores is paying off. The results indicate that a broad turnaround plan led by Chief Executive Officer Ravi Saligram is gaining traction. Investors sent the company's shares up more than 12 percent to $4.96 on Tuesday. "The first-quarter results show that OfficeMax is holding its own and that it is making progress against its strategic plan that was laid out last fall," Credit Suisse analyst Gary Balter said in a note to clients. In November, the company told investors it would close some stores, shrink some others, curb expansion in general and look for more ways to cut costs as it deals with weak sales. Better pricing and a focus on higher-margin private label products are also helping OfficeMax's margins, analysts said. Many investors look at office-supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates. OfficeMax's first-quarter net income fell to $4.9 million, or 6 cents a share, from $11.4 million, or 13 cents a share, a year earlier. Excluding charges related to store closures, the company earned 23 cents a share. On that basis, analysts were looking for 16 cents a share, according to Thomson Reuters I/B/E/S. Sales rose 0.5 percent to $1.87 billion, in line with Wall Street estimates. "While we do not think OfficeMax is completely 'out of the woods' by any stretch, we continue to believe the company's present valuation is ridiculously cheap," BB&T Capital Markets analyst Anthony Chukumba said, citing OfficeMax's current profitability, underleveraged balance sheet and positive free cash flow. The news came a week after larger rival Office Depot Inc (ODP.N) met Wall Street profit estimates with the help of cost cuts. Industry leader Staples Inc (SPLS.O) is due to report its results next week. Before Tuesday's gains, OfficeMax traded at about 7.3 times its forward earnings, while Staples traded at a multiple of about 10. Office Depot traded at a much higher multiple of 123.5. Sales at all three chains have suffered as both corporate customers and other shoppers cut back on discretionary spending, forcing the retailers to rely on cost cuts to boost profits. OfficeMax said sales for the second quarter will be flat to slightly lower compared with a year earlier. It also expects adjusted operating income margin to be about in line with the 1.1 percent of a year earlier. (Editing by John Wallace and John Wallace) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions