Sector Snap: Office Supply Retailers
03.05.2007 16:57
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- Source: Forbes
Shares of OfficeMax Inc. plunged on Thursday, after the office-supplies retailer said it swung to a first-quarter profit, but results missed analyst expectations. The Naperville, Ill., company said first-quarter net income was 76 cents per share, or 77 cents per share excluding a one-time loss on the sale of some operations in Mexico. However, analysts had forecast earnings of 93 cents per share, according to a Thomson Financial poll. Meanwhile, revenue edged up less than 1 percent to $2.44 billion. Analysts had expected revenue of $2.46 billion. Morgan Stanley (nyse: MS - news - people ) analyst Armando Lopez, who rates OfficeMax (nyse: OMX - news - people ) "Equal Weight" called the miss a "disappointment" and said results were hurt by lower-than-expected margins in the company's contract and retail segments. "Contract margin was 4.7 percent below last year's 5.4 percent and our 6.3 percent estimate," Lopez wrote in a note to clients on Thursday. "Retail operating margin was 5.5 percent, above last year's 5.1 percent, but below our 5.9 percent forecast." Deutsche Bank (nyse: DB - news - people ) Securities analyst Mike Baker, however, said the revenue increase of 0.5 percent is actually OfficeMax's best results in a year and called the quarter "not bad." "There maybe some concern regarding the drop in contract margins," he wrote in a Thursday report to investors. "But, when put in context of cycling a 2.9 percent gain in the contract margin a year ago, this quarter's decline is not concerning, in our view." He said expectations had gotten too high for the stock. "With less upside likely, we'd expect estimates to come down and this is what will hurt OfficeMax's stock today," he added. Indeed, shares slumped $7.10, or 14 percent, to $42.36 during midday trading. The stock has traded between $38.78 and $55.40 over the past year. Elsewhere in the sector, shares were mixed, but none were up or down significantly. Staples Inc. (nasdaq: SPLS - news - people ) shares rose 10 cents to $25.16, and Office Depot Inc. (nyse: ODP - news - people ) shares fell 24 cents to $34.22. Shares of the world's largest retailer, Wal-Mart Stores Inc. (nyse: WMT - news - people ), which sells office supplies, rose 37 cents to $48.65. Target Corp. (nyse: TGT - news - people ) shares fell 37 cents to $58.58. Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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