OfficeMax 2006 Annual Report Download - page 10

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6
Intense competition in our markets could harm our ability to maintain profitability.
Domestic and international office products markets are highly and increasingly competitive.
Customers have many options when purchasing office supplies and paper, print and document
services, technology products and solutions and office furniture. We compete with worldwide contract
stationers, office supply superstores, massmerchandisers, wholesale clubs, computer and electronics
superstores, Internetmerchandisers, direct-mail distributors, discount retailers, drugstores,
supermarkets and thousands of local and regional contract stationers. In addition, an increasing
number ofmanufacturers of computer hardware, software and peripherals, including some of our
suppliers, haveexpanded their own direct marketing efforts.The other large officesupply superstores
have increased their presence in our markets inrecent years and are expected to continue to do so in
the future. In addition, many ofour competitors have expanded their office products assortment, and
we expect they will continue to do so. In recent years, two package delivery companieshave
established retail stores that compete directly with us for copy, printing, packaging and shipping
business, and offer a limited assortment of office products and services similar to theonesweoffer.
We anticipate increasing competition from our two domestic office supply superstore competitors and
various other providers, including the two package delivery companies, for print-for-pay and related
services. Print-for-payand relatedservices have historically been a keypoint of difference for
OfficeMax stores and are expected to become an increasingly more important partofour future
strategies.Any or all ofour competitors may become even more aggressiveinthe future. Increased
competition inthe office products markets, together with increased advertising, has heightened price
awareness among end-users. Such heightened price awareness hasled to margin pressure on office
products and impacted the results of both our Retail and Contract segments. In addition to price,
competition isalso based on customer service, the quality and breadth of product selection, and
convenientlocations. Some of our competitors are larger than us and havegreater financial
resources, which affords themgreater purchasing power, increased financial flexibility and more
capital resourcesfor expansion and improvement, which may enable them to compete more
effectively than we can.
We may be unable to open and remodel stores successfully. Our business plans include the
opening and remodeling of a significant number of retail stores. For these plans to be successful, we
must identify and lease favorable store sites, develop remodeling plans, hire and train associates and
adapt management and systems to meet the needs ofthese operations. These tasks are difficult to
manage successfully. If we are not able to open and remodel stores as quickly as we have planned,
our future financial performance could be materially and adversely affected. Further, we cannot
ensure that the new or remodeled stores will achieve the sales or profit levels that we anticipate. This
is particularly true as we introduce different store designs, formats and sizes or enter into new market
areas. In particular, the “Advantage” prototype store format we intend to utilize for new and remodeled
stores is new and there can be no assurance as to whether or to what extent that format will be
successful.
Economic conditions directly influence our operating results. Economic conditions, both
domestically and abroad, directly influence our operating results. Current and futureeconomic
conditions, including the level of unemployment,energy costs and the financial condition and growth
prospects of our Contract customers may adversely affect our business and the results of our
operations.
Our quarterly operating results are subject to fluctuation.Our quarterly operating results
have fluctuated in the pastand are likely to do so inthe future. Factors that may contribute tothese
quarter-to-quarter fluctuations couldinclude the effects of seasonality, our level of advertising and
marketing, new store openings, changes in product mix and competitors’ pricing. These quarterly
fluctuations could have an adverse effect on both our operating results and the price of our common
stock.