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OfficeMax Warns of Challenges Ahead

OfficeMax narrows its loss in the fourth quarter, but warns that challenges lie ahead.



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narrowed its loss in the fourth quarter, but warned that it will continue to face challenging economic conditions this year.

During the quarter, the office supply retailer lost $3.2 million, or 4 cents a share, compared with a loss of $396 million, or $5.21, in the year-ago period.

Excluding items, the loss was 3 cents a share, easily topping analysts' forecast of a loss of 7 cents. The company had significantly fewer write-downs this year compared with last year.

Sales fell 4% to $1.81 billion, while same-store sales tumbled 6.7%.

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OfficeMax said it expects to post a sales growth in 2010, while analysts forecast 1.7% sales decline.

Even with this sales growth, "The company expects to continue facing challenging economic conditions, such as U.S. unemployment trends, over the near-term with these trends beginning to work in the company's favor toward the latter part of the year," CEO Sam Duncan said in a statement.

"We think the bears will look at guidance for the first quarter and 2010 and say it's implied below the Street," J.P. Morgan analyst Christopher Horvers wrote in a note. "However, we think that is confusing the trees from the forest. This is not about a fourth-quarter beat, this is about earnings power, a later cycle stock and a modest macro recovery."

Horvers maintains his overweight rating on the stock, saying investors should be pleased that sales showed sequential improvement.

-- Reported by Jeanine Poggi in New York.

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