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Lower costs help office supply chains offset weak sales

Tight cost controls helped U.S. office supply retailers Office Depot Inc and OfficeMax Inc offset weaker-than-expected sales in the third quarter.

Many investors look at office-supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates.

Sales have suffered as corporate customers and other shoppers cut back on discretionary spending in the weak economy, forcing the retailers to keep a tight lid on costs.

The industry also faces increased competition from mass merchants, online chains and drugstores.

Office Depot, the second largest U.S. office supply chain, said the third-quarter net loss was $70 million, or 25 cents a share, compared with net earnings of $92 million, or 28 cents a share, a year earlier.

Excluding items, it earned 6 cents a share, while analysts, on average, were looking for a profit of 1 cent a share, according to Thomson Reuters I/B/E/S.

Sales at the retailer fell 5 percent to $2.69 billion, while analysts expected $2.73 billion.

OfficeMax's net income rose to $433.0 million, or $4.92 a share, from $21.5 million, or 25 cents a share, in the third quarter of 2011. Excluding items, it earned 27 cents a share, above the analysts' average estimate of 25 cents a share.

Sales at the No. 3 U.S. office supply chain fell 1.7 percent to $1.74 billion, while analysts expected $1.78 billion.

(Reporting By Dhanya Skariachan; Editing by Jeffrey Benkoe)