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Mixed First Quarter for Chapters
Jim Milliot &Leah Eichler -- 8/7/00

Chapters reported that total revenues for the first quarter ended July 1, 2000, rose 11.8%, to $136.9 million, and that its net loss for the period deepened to $12.7 million from $9.4 million.

The figures include results from Chapters' retail operations, Chapters Online and Pegasus Wholesale. The retail division, which now has 71 superstores and 221 traditional outlets, had a 4.4% sales gain, to $123.9 million, and its net loss was cut to $3.8 million from $4.3 million. Superstore sales increased 14.2%, to $83.4 million, but sales from traditional stores fell 12.1%, to $37.5, due to the closure of 11 stores and a 5.9% decline in comparable-store sales. Revenue from Chapters Online shot up 243%, to $12.7 million, while its net loss rose a more moderate 77%, to $6.9 million. Pegasus posted revenues of $36.7 million, compared to no sales in last year's first quarter. Net loss was $2.0 million, compared to $1.2 million last year. Chapters noted that a government report had affirmed that Pegasus "is not the source of book industry problems."

Reacting to comments about Chapters' cash position, company CEO Larry Stevenson said that Chapters' cash flow requirements were the lowest they have ever been in the first quarter. He noted that Chapters Online has its own financing, and that Chapters d s not have the up-front costs associated with launching Pegasus as it did last year. In addition, Chapters plans to open only seven superstores this year, compared to 16 in fiscal 2000.

The release of Chapters' results followed a rather bizarre weekend, during which the Canadian newspaper National Post said HarperCollins of Canada had stopped shipping books to the giant chain because of unpaid bills. In a statement, Chapters said the story was "factually incorrect and grossly misleading," and then announced it was suing the Post for libel, maintaining that the stories had caused serious harm to the company's reputation.
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