The company isn't giving up without a fight, though. There's relatively new management at the wheel, and those managers have recently talked about a turnaround plan that focuses on cost cuts, supply chain management, closing underperforming stores, and increasing their focus on small business customers.
So far, so good. Yeah, I know this quarter doesn't look great. Revenue was down 9% as reported, although results were basically flat when you exclude the Boise Business Solutions and Paper Solutions businesses (which were sold) and adjust for the extra selling days in this quarter. Gross margins improved a bit, adjusted operating income was positive (although with a weak margin), and earnings ex-items matched the average estimate.
More importantly, though, the company didn't botch anything -- it did what it said it was supposed to do. Given that turnarounds are often drawn-out processes, share-price performance in the meantime often depends upon management credibility, and OfficeMax certainly helped itself there this quarter.
There's no doubt that retail turnarounds can be powerful mojo for patient and risk-tolerant investors -- look what stocks like Circuit City
For now, I'd say that OfficeMax is off to a good start, but there's plenty of work to be done. In particular, I'm hoping to hear more in the not-so-distant future about efforts to stimulate demand, as same-store sales were down 1% in the quarter. Sure, cost-cutting is important (as is sloughing off poor-performing stores), but you can't really cut your way to sustainable growth.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).