OfficeMax 2009 Annual Report Download - page 11

provide an appropriate customer experience and our sales are dependant on the foot traffic and
sales of the retail partner. Although we may have influence over the appearance of the area within
the store where our products appear, we have no control over store marketing, staffing or any other
aspects of our retail partners’ operations. Although we frequently test new store designs, formats,
sizes and market areas, 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. 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 other significant 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. Failure to increase sales through new distribution opportunities or
replace lost sales could materially and adversely affect our future financial performance.
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
policies, competitive conditions, foreign currency fluctuations and unstable political and economic
conditions.
Our quarterly operating results are subject to fluctuation. Our quarterly operating results
have fluctuated in the past and are likely to do so in the future. Factors that may contribute to these
quarter-to-quarter fluctuations could include the effects of seasonality, severe weather, our level of
advertising and marketing, new store openings, changes in product mix and competitors’ pricing.
Most of our operating expenses do not vary depending on the level of sales; if we are unable to
reduce these expenses commensurately with the reduced sales then these quarterly fluctuations
could have an adverse effect on both our financial results and the price of our common stock.
We may be unable to attract and retain qualified associates. We attempt to attract and
retain an appropriate level of personnel in both field operations and corporate functions. We face
many external risks and internal factors in meeting our labor needs, including competition for
qualified personnel, prevailing wage rates, as well as rising employee benefit costs, including
insurance costs and compensation programs. Failure to attract and retain sufficient qualified
personnel could interfere with our ability to adequately provide services to customers.
Our expanded offering of proprietary branded products may not improve our financial
performance and may expose us to product liability claims. Our product offering includes many
proprietary branded products. While we have focused on the quality of our proprietary branded
products, we rely on third party manufacturers for these products. Such third-party manufacturers
may prove to be unreliable, the quality of our globally sourced products may not meet our
expectations or such products may not meet applicable regulatory requirements which may require
us to recall those products. Furthermore, economic and political conditions in areas of the world
where we source such products may adversely affect the availability and cost of such products. In
addition, our proprietary branded products compete with other manufacturers’ branded items that
we offer. As we continue to increase the number and types of proprietary branded products that we
sell, we may adversely affect our relationships with our vendors, who may decide to reduce their
product offerings through OfficeMax and increase their product offerings through our competitors.
Finally, if any of our customers are harmed by our proprietary branded products, they may bring
product liability and other claims against us. Any of these circumstances could have an adverse
effect on our business and financial performance.
We are more leveraged than some of our competitors, which could adversely affect our
business plans. A relatively greater portion of our cash flow is used to service debt and other
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