Showing more strength than expected, sales at Barnes & Noble and Borders Group stores open at least a year rose and both booksellers predicted that the positive trends will continue through the holiday season.
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At B&N, sales in the third quarter ended November 3 rose 5.7% to $1.2 billion and
net earnings were $4.4 million, which included a $6.2 million after-tax
benefit (because of a favorable physical inventory shortage rate),
without which the company would have had a net loss of $1.8 million.
Last year the net loss was $2.8 million.
Comp-store sales rose 2.6%, and sales at B&N.com rose 14.5% to
$108.2 million. In the fourth quarter, B&N expects comp-store sales
at B&N stores to increase in the low single digits.
Bestselling titles at B&N included Alan Greenspan's The Age of
Turbulence, John Grisham's Playing for Pizza, Ken Follett's World
Without End, Nicholas Sparks' The Choice and Stephen Colbert's I Am
America (and So Can You!).
CEO Steve Riggio commented: "The company's sales continued to perform
at the higher end of expectations, due in part to strong sales of new
releases and bestsellers, which combined with a better than expected
gross margin rate enabled the company to outperform its third quarter
earnings expectations. In addition, we are encouraged by the sales
trends at Barnes & Noble.com that began earlier this year and
continued through the third quarter, in which we launched a newly
designed website."
During the quarter, B&N bought 4.9 million of its shares for $172.5
million. So far this fiscal year, it has bought 6 million shares and is
authorized to spend another $232.4 million under the current share
repurchase program.
Also during the quarter, B&N opened 14 B&N stores and closed three and now has 709 B&N stores and 92 Daltons.
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At Borders Group, sales in the third quarter ended
November 3 rose 5.3% to $805.2 million and the net loss was $39.1
million compared to $32.9 million a year ago. Including a one-time
$116.5 million after-tax loss related to the sale of the company's U.K.
and Irish bookstores and $2.6 million of after-tax non-operating
charges, the company had a $161.1 million loss.
For the second quarter in a row comp-sales rose in all
three of Borders's business segments. Comp-store sales at U.S. Borders superstores rose 1.1%,
"driven largely by a continued increase in traffic as the company
further leveraged its 22-million-member Borders Rewards database, among
other initiatives." Comp-store sales increased by 3.6% in the
Waldenbooks Specialty Retail segment, which includes Borders Express
stores, mainly because of "growth in traffic and transaction size."
International comp-store sales were up 7.8% because of "strong
performance in Asia Pacific stores."
CEO George Jones commented: "We are pleased with the progress we are
making toward a turnaround of this company. Many of our initiatives are
clearly working, as we have reversed previous negative trends and are
now consistently increasing traffic and same-store sales, both of which
had been steadily declining prior to the implementation of our
strategic plan. The stage is set for a much improved holiday season
compared to last year. We fully expect to deliver improved same-store
sales results, while at the same time increasing profitability in the
fourth quarter of this year versus 2006."
Gross margin decreased by 0.7% to 22% in the quarter, mainly because of
increased discounts redeemed by the larger number of Borders Rewards
members as well as "shrink" in the DVD and café sections.
At U.S. Borders stores, sales rose 5.6% to $615.8 million and
comp-store transactions rose 2.8%. Sales of books rose 3.1% on a
comp-store basis; music fell 13.1%. Comp-store cafe and Paperchase
gifts and stationery sales rose 7.4% and 8.4%, respectively. During the
quarter the company opened four Borders superstores and now has 510
superstores in the U.S.
Sales at the Waldenbooks Specialty Retail segment fell 11.4% to $109.7
million, reflecting the closing of 131 stores in the past year. There
are now 521 Waldenbooks Specialty Retail stores. The comp-store sales
gain of 3.6% was attributed in part to an increase of 1.8% in
transaction size.
Sales from international stores, excluding the sold U.K. and Irish
bookstores, rose 38.4% to $79.7 million. In this area Borders benefited
from the weak U.S. dollar. Without currency fluctuations, sales would have risen 25.9%.