As at Barnes & Noble and Books-A-Million, which reported dismal third-quarter results last week, Borders did not have cheery news yesterday about sales.
Sales at Borders Group in the third quarter ended November 1 dropped 9.4% to $693.4 million, and the net loss was $175.4 million compared to a net loss last year of $161.1 million.
Sales at Borders superstores open at least a year fell 12.8%. Excluding music, comp-store sales dropped 10.6%. The company noted "a steep decline in customer traffic that was most pronounced in the months of September and October." Comp-store sales at Waldenbooks fell 7.7%. International sales, which now consists primarily of Paperchase, dropped 6.2% to $30.3 million. Sales at Borders.com were $11.9 million.
The operating loss of 64 cents a share was higher than expected by Wall Street analysts, who had predicted a loss of 50 cents a share. As a result, Borders stock fell 50% in after-hours trading, according to the AP.
But the company trumpeted some numbers. During the quarter, debt fell 34.2% to $525.4 million. Operating cash flow from continuing operations rose $110 million. The company reduced inventory by $304.2 million, about 19.5%. Borders also predicted that it will lower next fiscal year's operating expenses by $140 million compared to its previous target of $120 million.
In a statement, Borders CEO George Jones said, "Borders has successfully reduced debt, improved operating cash flow, lowered expenses, improved gross margin--excluding occupancy--and improved inventory productivity during a time of extreme economic challenge. We stated at the beginning of this year that strengthening our balance sheet is our top priority, and we are delivering results. We'll remain keenly focused on these critical initiatives, and in addition, will increase our efforts to drive further gross margin improvement. All of the changes we are making will position Borders Group to compete more effectively."
After having sold most of its international bookselling operations during the past year and putting itself up for sale, Borders has decided to take itself off the market, although it may yet sell its Paperchase stationery subsidiary to Pershing Square Capital Management, the hedge fund that is its single-largest shareholder, for $65 million. Borders also is in discussions with Pershing Square about "an alternative financing transaction."
---
Borders suffered a bit of a prestige blow yesterday: the stock is being dropped from Standard & Poor's MidCap 400 index because its market capitalization of a little over $100 million is nowhere near the admission requirement of $1 billion.