OfficeMax (NYSE:OMX) Gross Margins Have Room to Grow

After recently meeting with the management team of OfficeMax (NYSE:OMX), Barclays (NYSE:BCS) said they believe their gross margins have room to expand, although there will be some challenges over the next 12 months.

Barclays said, "We recently hosted investor meetings with members of OMX's management team. Our takeaways from the meetings included: We think OMX still has room to expand its gross margin even though comparisons will become more difficult in the next few quarters. The company should benefit from increasing its penetration of private label products, improved shrink performance, and greater supply chain efficiency. On the contract side, we think the company is taking a deeper look at the profitability of each customer to ensure that certain benchmarks are met. These factors should provide a tailwind into 2011...We think the demand environment remains stable...In our view, OMX shares should have substantial upside once the office supply industry experiences a resurgence, but the timing of this upturn remains elusive."

Barclays maintains an "Equalweight" rating on OfficeMax, which closed Tuesday at $17.82, up $0.21, or 1.19 percent. They have a price target on them of $19 by Barclays.