CHICAGO – OfficeMax Inc., struggling to keep up with its competition in the crowded office supplies business, said Tuesday it will close 110 retail superstores across the United States and make other restructuring moves in the first quarter.
The company also said it will close its wood-polymer building materials plant in Elma, in Grays Harbor County, and five retail stores in Canada as part of a shake-up that will result in $187 million in pretax charges.
The moves represent the latest attempt by the Itasca, Ill.-based company to shake out of the doldrums after what its largest investor has blasted as “dismal” financial and operating performances recently.
It wasn’t immediately clear if the restructuring was enough to satisfy the investor, K Capital Partners LLC, whose managing director, Brian Steck, demanded changes in November in a scathing letter to the board of directors. A telephone message left with Steck’s office in Boston was not returned Tuesday.
Analyst Anthony Chukumuba of Chicago-based Morningstar Inc. said OfficeMax has fallen further behind both industry leader Staples Inc. and No. 2 Office Depot Inc. despite two years of changes, which most recently included a new store format featuring boutiquelike shopping areas, soft lighting and a cafe.
Chukumba said it is good strategy for OfficeMax to cut its losses and close stores now rather than continue operating them with weak results.
“Clearly, the U.S office supplies superstore market is becoming overstored, so I actually view this as a good move,” he said.
OfficeMax did not disclose the locations of the stores targeted for closure by the end of March, or how many jobs would be affected. The company will be notifying the stores involved over the next week, spokesman Bill Bonner said.
In a regulatory filing, it indicated that all the stores to be closed are superstores, which comprise the vast majority of its approximately 950 U.S. stores.
OfficeMax still intends to open 70 new stores this year, and expects to have 887 domestic retail stores at the end of the year.
It said $46 million of the restructuring charge will be applied to the fourth quarter of 2005, and the other $141 million will be incurred in the first quarter of this year.
The company, besides reporting disappointing sales, also has suffered from internal problems.
Sam Duncan, chairman and chief executive officer since last year, called the closings “a difficult but necessary step toward improving our company’s overall performance.”
He said the move resulted from an assessment last year of each store’s results and growth potential.
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