OfficeMax 2008 Annual Report Download - page 10

significantly impacted by current macroeconomic conditions, both in the U.S. and Asia, including
little or no access to credit. We may have no warning before a vendor fails, which may have an
adverse effect on our business and results of operations. Further, we cannot control the cost of
manufacturers’ products, and cost increases must either be passed along to our customers or will
result in erosion of our earnings. Failure to identify desirable products and make them available to
our customers when desired and at attractive prices could have an adverse effect on our business
and results of operations.
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, mass merchandisers, wholesale clubs, computer and
electronics superstores, Internet merchandisers, direct-mail distributors, discount retailers,
drugstores, supermarkets and thousands of local and regional contract stationers. In addition, an
increasing number of manufacturers of computer hardware, software and peripherals, including
some of our suppliers, have expanded their own direct marketing efforts. The other large office
supply superstores have increased their presence in close proximity to our stores in recent years
and are expected to continue to do so in the future. In addition, many of our competitors have
expanded their office products assortment, and we expect they will continue to do so. We anticipate
increasing competition from our two domestic office supply superstore competitors and various
other competitors for print-for-pay and related services. Print and documents services, or
print-for-pay, and related services have historically been a key point of difference for OfficeMax
stores. Any or all of our competitors may become even more aggressive in the future. Increased
competition in the office products markets, together with increased advertising, has heightened
price awareness among end-users. Such heightened price awareness has led to margin pressure
on office products and impacted the results of both our Retail and Contract segments. In addition
to price, competition is also based on customer service, differentiation from competitors, the quality
and breadth of product selection, and convenient locations. Some of our competitors are larger
than us and have greater financial resources, which affords them greater purchasing power,
increased financial flexibility and more capital resources for expansion and improvement, which may
enable them to compete more effectively.
We may be unable to open stores successfully and our store closures may accelerate.
Our long-term success depends, in part, on our ability to open new stores in a manner that
achieves appropriate returns on our capital invested. This is particularly challenging 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 stores was new in 2006 and there
can be no assurance as to whether or to what extent that format will be successful. If we are unable
to generate the required sales or profit levels, as a result of macroeconomic or operational
challenges, we will not open new stores and our future financial performance could be materially
and adversely affected. Similarly, we will only continue to operate existing stores if they meet
required sales or profit levels. In the current macroeconomic environment, the results of our existing
stores are impacted not only by a reduced sales environment, but by a number of things that are
not within our control, such as loss of traffic resulting from store closures by significant other
retailers in the stores’ immediate vicinity. If we are required to close stores, we will be subject to
costs and impairment charges that may adversely affect our financial results.
Our international operations expose us to the unique risks inherent in foreign operations.
Our foreign operations encounter risks similar to those faced by our U.S. operations, as well as
risks inherent in foreign operations, such as local customs and regulatory constraints, foreign trade
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