OfficeMax 2007 Annual Report Download - page 2

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Dear Shareholders:
2007 was a year of continued progress on our turnaround plan, and we were pleased with the results of
the actions we pursued with the goal of generating value to our shareholders. During the year, we focused
on simplifying our organization, controlling costs and positioning the Company for improved profitability.
Our financial results reported in this annual report for 2007 reflect our focus on profitable sales and effective cost
management, but also the weaker economic environment we experienced in the second half of the year. As expected in a turnaround,
we continued to recalibrate our strategies in 2007 to address certain economic and execution challenges during the year. Taken as a
whole, in 2007 we reduced expenses, expanded operating income and generated bottom-line earnings growth.
During the year, we pursued several initiatives to improve our Contract and Retail operating segments. A critical Contract segment
initiative during 2007 was the reorganization of our U.S. Contract business, aimed at building more cohesive sales and operations
teams to position us for further improvement. The initial reorganization in field sales restructured leadership and reduced overall field
sales headcount, but increased sales hunters targeting future growth. In mid-2007, we implemented action plans to focus on improving
margins from existing, new and renewing Contract accounts. As part of the reorganization, we consolidated our U.S Contract delivery
and warehouse operations with our Retail store fulfillment. The consolidation enabled us to simplify our organization, and generate
substantial cost savings. We also improved our U.S. Contract product offering in 2007, with more emphasis on meeting customer
requirements for selection and cost. In U.S. Contract, we are moving toward a value proposition that can flex to align with our
customer requirements for cost, service and product offering, while generating incremental operating improvement for OfficeMax.
An important Retail initiative in 2007 was refining and implementing our real estate strategy. For the year, we opened 59 new stores in
the U.S. and 15 new stores in Mexico. We also successfully tested an additional 12 remodels that helped us transform our aging stores
to the look and feel of our successful Advantage store prototype. The results of the 2007 remodel test are enabling us to reduce cycle
time for completing remodels, and value engineer our investment for the best return. Our multi-year real estate strategy is expected to
include a balance of new store openings, mostly in existing markets, along with store remodels.
Our Retail initiatives in 2007 also included continuing to adjust promotional strategies to focus on more profitable sales from our stores,
even as we experienced a weaker U.S. economy. Across both our Contract and Retail segments, we continued to enhance our
merchandise assortment in 2007. This included expansion of private label product sales which provide value and quality to our
customers and typically higher margins for OfficeMax. Our merchandising initiatives in 2007 were supported by improved marketing
programs for new store openings, branding, and selling events, including our successful and popular holiday marketing website
ElfYourself.com. Additionally, our supply chain initiatives benefited merchandise inventory levels resulting in lower inventory per store,
improved in-stock metrics, and lower discontinued inventory levels.
With the advancements we made in 2007, our sights are now set on 2008 and beyond. Long term, we believe we are positioned to
further improve our Contract and Retail segment financial performance, while aligning our organization to better serve our customers.
While we entered 2008 facing a challenging economic environment, we remain committed to our turnaround plan and initiatives to
increase shareholder value.
I sincerely appreciate our approximately 36,000 worldwide OfficeMax associates for their commitment and dedication to servicing our
customers. We look forward to updating you on our progress during 2008. Thank you very much for your continuing support.
Sincerely,
Sam Duncan
Chairman and Chief Executive Officer
March 2008
To our shareholders