Blaming the slowing economy, office supplies cataloger/retailer OfficeMax will close 50 of its 996 stores this spring in an attempt to reduce capital expenditures. The $4.8 billion OfficeMax lowered its fourth-quarter earnings estimates to a loss of $0.10-$0.15 per share. The Shaker Heights, OH-based company was slated to announce on March 6 results for the quarter and the fiscal year, which ended Jan. 2.
The 50 stores, which are in 17 states, have been turned over to third-party liquidators and will likely be closed by April. “We conducted a review in October of our stores, and based on the financial and strategic criteria, we identified these stores as underperforming,” says OfficeMax spokesperson Steve Baisden.
OfficeMax has no plans to scale back its catalog and Website business, Baisden says. Rather, “we plan to increase our catalog and Internet advertising in the markets where we’re closing stores.” OfficeMax also plans to open 25 new stores by 2002 — though not in the same regions where it is closing stores.
But Daniel Binder, vice president/senior analyst with Buckingham Research Group, a New York-based financial firm, questions OfficeMax’s planned strategy of opening more stores. “I think that the company’s decision to close stores to reduce capital expenditures is encouraging, but it’s now offsetting that with the 25 planned openings,” he says. “We’ve recently listed them at a swap rating, which is essentially a sell,” and one level below a neutral rating.
And investments by Mexican financier Carlos Slim Helu, who in October purchased more than 1.9 million shares of OfficeMax for between $2.36 and $3.04 apiece, doesn’t guarantee that the company’s standing will improve, Binder says. Helu’s finance group, Grupo Sanborns, purchased computer retailer CompUSA in March 2000 for $797.7 million; in April, CompUSA announced that it planned to lay off about 1,500 employees in an effort to reduce expenses.