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Earnings off 90% at OfficeMax

Office Max profits fell sharply in the fourth quarter. (Associated Press / The Spokesman-Review)
Associated Press
Office Max profits fell sharply in the fourth quarter. (Associated Press / The Spokesman-Review)

CHICAGO — OfficeMax Inc. reported a 90 percent drop in fourth-quarter earnings to $700,000 Monday, but its chairman dismissed the need to consider splitting up the beleaguered office products retailer, as a shareholder group has proposed.

George Harad, who also became interim CEO last month when Christopher Milliken resigned in the wake of an accounting scandal, said this would be “a particularly inopportune time” for the company to change direction since other strategic steps already are being taken.

Those actions, he said, include reshaping top management, integrating contract and retail operations, being more selective with promotions, reducing debt and committing $775 million to $815 million toward a planned share repurchase.

“Despite the recent setbacks, we remain confident that the strategic business plan we’re following is sound and will deliver real value to our shareholders,” Harad told analysts on a conference call.

His comments were the company’s first since last Friday’s regulatory filing by K Capital Partners LLC, an investment firm that owns a 6.2 percent stake and announced it had hired a financial adviser to consider a breakup or other strategic alternative for OfficeMax.

While dismissing that option, Harad acknowledged that OfficeMax’s performance has been lackluster. He blamed the disappointing recent results on weak sales and “execution issues” with merchandising decisions and promotions that didn’t pay off as well as hoped.

“We recognize that our office products businesses’ financial performance of 2004 fell well short of our original expectations,” he said.

OfficeMax, the No. 3 office products retailer behind Staples Inc. and Office Depot Inc., has seen its recent performance marred by sluggish sales, the accounting scandal and the departure of three top-level officials in the past two months.

Revenue increased 14 percent to $2.69 billion from $2.35 billion, reflecting the December 2003 acquisition of the office-products business by the company, then named Boise Cascade Corp.