This company is taking the office supply business to the max. OfficeMax is the #3 office products retailer in North America (behind Staples and Office Depot), with 900-plus superstores across the US, Puerto Rico, the US Virgin Islands, and Mexico. The stores offer about 11,000 name brand and OfficeMax-branded products, including paper, pens, forms, and organizers, as well as office furniture and a wide range of technology products. OfficeMax also provides printing and document services through its ImPress store-within-a-store. Its contract division sells directly to business and government customers by phone, catalogs, and the Internet. Amid slumping sales, OfficeMax has agreed to merge with Office Depot.
Change in Company Type
In February 2013 Office Depot said it would acquire OfficeMax in a $1.17 billion all-stock deal. (Office Depot shareholders would hold 51% of the combined company, with OfficeMax shareholders getting 44%.) By joining forces, Office Depot and OfficeMax expect to save $300 million-$600 million in costs and to create a stronger competitor to market leader Staples.
OfficeMax rings up nearly 80% of its sales in the US, home to about 850 of its superstores. The office products retailer's 51%-owned Mexican joint venture, Grupo OfficeMax, operates about 90 stores in Mexico. OfficeMax's reach extends across the Atlantic Ocean through a strategic alliance with Lyreco, based in Europe.
OfficeMax operates on both the retail and wholesale sides of the office products supply business. Contract sales -- made directly to large corporate and government offices, and to small and medium-sized businesses in the US, Canada, Australia, New Zealand, and Puerto Rico -- is the firm's largest business segment, representing 52% of sales in 2012. The contract division operates 40 distribution centers.
The 940 OfficeMax retail superstores account for 48% of the company's sales. The stores house OfficeMax ImPress departments, which offer print-for-pay and related document services.
Sales and Marketing
Advertising expense was $211.6 million in 2012, down from about $225 million in 2011 and $228 million in 2010. OfficeMax's Contract business markets and sells through field sales representatives, outbound telesales, catalogs, the Internet and, primarily in foreign markets, through office products superstores.
OfficeMax's sales declined during the recession, as businesses closed or cut back on purchasing, and have not recovered along with the economy. Indeed, contract sales have been flat at $3.6 billion for the past three years, while retail sales declined to $3.3 billion in 2012, vs. $3.5 billion in 2011 and 2010. Overall, OfficeMax's sales decreased 3% in 2012 vs. 2011, while net income soared more than 1,000% to nearly $417 million over the same period.
Sales fell by about 3% in the US and 1.5% abroad in 2012 vs. 2011.
OfficeMax's position as a distant third in the nearly saturated office products market in North America has put the company in a difficult position. (The firm had been doing a bit better overseas, where both the contract and retail divisions posted sales gains in 2011 and 2010.) Prior to its agreement to merge with Office Depot, OfficeMax had been closing stores in the US (about 60 over the past three years). Same-store sales (generally considered the best indicator of a retail chain's health) have been negative since 2007. In 2011 the company, led by CEO Ravi Saligram, announced a strategic plan for sustainable, profitable growth. Elements of the plan included: improving store and sales force productivity; acquiring more small- and medium-sized business customers; developing a digital growth engine; opening in-store departments in grocery and drugstore chains in the US; leveraging partners and alliances; and expanding further in Mexico.
To make a challenging business climate even tougher, OfficeMax is facing increased competition in Europe and the US as a result of rival Staples' acquisition of Corporate Express NV. Corporate Express is a major office products wholesaler, with more than half of its sales in the US through Corporate Express US.