I've tried to see the positives in OfficeMax's
Its contract segment, which sells directly to business customers, faces stiff competition, including office superstores Office Depot
OfficeMax's retail segment fared a little better, but not much. Its sales increased just 4.4%, and same-store sales rose 2.7% (adjusting for the company's decision to eliminate mail-in rebates and provide instant rebates). I realize sales performance was better than at Staples and Office Depot, but OfficeMax was also facing a very weak comps decline of 1% last year. The segment's gross margin expanded just 20 basis points, to 29.9%, citing more effective promotion strategies. Still, I don't believe margins can expand meaningfully unless top-line growth increases at a more substantial rate. This will be difficult, since it not only faces the aforementioned competitors, but also companies such as Costco
Facing a very competitive marketplace, OfficeMax's distant third place in the industry may be threatened. The rumor mill is full of takeover speculation, and that might provide salvation. Going it alone may be an uphill battle.
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Fool contributor Larry Rothman is happy to receive feedback, and promises to read it when not being wrestled by his three children. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.