OfficeMax (OMX) rolled out a turnaround plan just days after it gave into a big investor and said it wouldn't renew its poison pill.
The Itasca, Ill., office supply chain said its so-called Turnaround Plan for Higher Performance involves reforming the supply chain, improving operating performance, increasing cost savings and improving capital allocation.
The company will close 110 domestic underperforming retail stores during the first quarter of 2006 in addition to the five Canadian retail stores closed during the fourth quarter of 2005. It plans to open 70 new domestic OfficeMax stores in key high-growth regions in 2006. The OfficeMax domestic store count is expected to be approximately 887 at the end of 2006 vs. 927 at year-end 2005, for a net decrease of 40 stores in 2006.
OfficeMax has also identified several programs for improving growth and efficiency in Contract operations. These include continuing to focus on the middle-market and other high-growth, high-return customers; pursuing product extension opportunities; driving Retail sales through Contract customers; completing an evaluation of Canadian operations; and implementing systemwide cost efficiencies.
The company believes that the pretax impact of key improvement initiatives could be approximately $100 million. The company expects 2006 total consolidated sales growth will be flat to slightly up, Retail segment same store sales growth in the low single digits and Contract segment sales growth in the mid-single digits.
"Our Turnaround Plan demonstrates our full focus and commitment to improving sales and profitability to enhance value for our shareholders, and under this plan, we are targeting higher performance levels across the entire company," said CEO Sam Duncan. "We are confident that our complementary Retail and Contract business models give OfficeMax the significant potential to grow and deliver stronger returns to shareholders. We look forward to providing additional details during the investor Webcast presentation today."