OfficeMax 2006 Annual Report Download - page 29

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25
2005 Compared With 2004
In 2005, Retail segment sales were $4,529.1 million, up 1.1% from sales of $4,481.3 millionfor
2004. During 2005,Retail segment sales decreased 1.0% year-over-year on asame-location basis.
Retail segment sales in 2005 benefited from a 53rd week,which increased sales by approximately
$75 million. Excluding this impact, Retail segmentsales decreased as a result of reduced promotional
activity and advertising placements, primarily during the first half of 2005, a strategy used to reduce
costs and shift marketingfocus toward oursmall business customer, partially offset by an increase in
the average dollar amount per customer transaction. During 2005, our Retail segment opened 33
stores in the U.S.and 6 stores in Mexico and closed 9 storesin the U.S.
Our Retailsegment gross profit marginfor 2005 was 26.2% of sales, compared to 25.6% of sales
in 2004. The increase in gross profitmarginwas primarily due to a shift in mix to higher margin
products and services, a direct result of our new promotional and advertising strategy.
Retail segment operatingexpenseswere 25.6% of sales in 2005 compared to25.1% in2004. In
2005,werecorded $17.9 millionin asset impairment charges primarily related to the retail store
closures. Excluding thesecharges, operating expenses were 25.2% ofsales in2005.
For 2005, the Retail segment had operating income of $27.9 million, compared to $22.7 million in
2004.Operating margin forour Retail segment was 0.6% of sales in 2005, compared with 0.5% of
sales in 2004. In 2005, we recorded $17.9 millionin asset impairment charges primarily related to the
retail store closures. Excluding these charges, operating margin in 2005 was 1.0% of sales. This
increase in operating margin is a result of increased sales due to the additional selling week and
improved gross profit margindue to a shift inmix tohigher margin products and services.