Shares of office products retailer and distributor OfficeMax (NYSE:OMX) ticked down slightly on heavy volume in Wednesday trading following the company's issuing of a short announcement in which it said, without providing much in the way of specifics, that business -- in short, sales, same-store sales, and gross margins -- has been weaker than expected in Q4, which will lead to full-year operating income below previous forecasts.
No doubt the lack of details led to the relatively small move in the company's market value: OfficeMax's shares were off less than 1% yesterday. We know that the company was looking for 2004 net income of between $210 million and $240 million; it now seems prudent to expect the numbers to come in below the low-end estimate, though how much is anyone's guess.
Yesterday's high trading volume, however, is understandable. This isn't the same OfficeMax you may remember if you haven't looked at the company in a while. Boise Cascade purchased it in December 2003, subsequently selling off its building products, paper, and timberland assets to concentrate on selling and distributing office products through stores, the Internet, and catalogs. (OfficeMax was purchased to help brand the venture and was adopted as the corporate moniker just weeks ago.)
The move is a bet on a prolonged economic recovery that would spur demand from various employers to stock those closets. But competition is fierce in this business: Staples (NASDAQ:SPLS) and Office Depot (NYSE:ODP), as recently discussed by Nathan Slaughter, are the big names, and there are numerous local and regional competitors as well.
The new company has shown some encouraging signs, such as strong nine-month sales growth companywide through Q3. But it hasn't been a slam dunk particularly on the retail end and would probably have been worse had the company not closed 45 struggling locations in Q1. Yesterday's news is a reminder that there's yet more work to do.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
