Chain Sales Rise 9%, To $7.2 Billion

Total revenues from the nation's three largest bookstore chains rose 9% for the fiscal year ended February 3, 2001, to $7.21 billion. The gain is less than the 11% increase posted by the nation's top chains in the previous year, and sales grew slower in fiscal 2001 than fiscal 2000 at all three remaining chains—Barnes & Noble, Borders Group and Books-A-Million. The 2001 ranking excludes Crown Books, which went out of business earlier this year.

With store revenues up 9.9%, to $3.24 billion (News, Mar. 26), Borders Group was the fastest-growing chain last year, although its growth rate slipped from 15.1% recorded in fiscal 2000.

At B&N, sales in the bookstore group rose 8.9%, to $3.55 billion, a figure that excludes $758 million in revenues generated by B&N's Babbage's subsidiary. Superstore sales were up 12.3% in the year, to $3.17 billion, while revenues at B. Dalton fell 12.6%, to $372.2 million. The retailer had 908 bookstores (569 superstores, 339 Dalton outlets) as of February 3, down from 942 outlets last year. The company plans to open about 40 superstores this year and close approximately 40 Dalton outlets, a strategy that will give B&N more than 600 superstores, while pushing the number of Daltons to just below 300.

The write-down of selected assets of Dalton as well as other one-time charges that amounted to a total of $106.8 million in the year resulted in a net loss for the company of $52 million in fiscal 2001, compared to net income of $129 million in the prior year. EBITDA (earnings before interest, taxes, depreciation and amortization) at the bookstore division increased 9.8%, to $357 million.

Looking at fiscal 2002, B&N expects comparable store sales at its superstores to increase in the 4% to 5% range and is looking for improved operating profits from the unit. B&N expects the second half of the year to be stronger than the first six months, as the bookstore chain faces difficult sales comparisons in the early period due to the strong sales of Pokémon merchandise last year.

Total sales at BAM rose 3.6%, to $418.6 million, for the year ended February 3, 2001, but net income fell 47.5%, to $3.1 million. A weak fourth quarter, in which earnings fell 26%, to $4.5 million, and sales rose 2.8%, to $141.7 million, hurt results for the entire year.

Company chairman Clyde Anderson said the disappointing fourth quarter was due in part to a soft retail environment and softness in the chain's collectors category, which had a major hit last year with Pokémon merchandise. According to Anderson, BAM's core book business had a solid quarter and year. Comparable store sales were down 2.9% for the year.

Anderson's forecast is similar to B&N's; although he expects earnings to be up in fiscal 2002, he said a small net loss is likely in the quarter and revenue comparisons will be difficult because of strong Pokémon sales in last year's first quarter. Anderson added that the integration of the 18 recently acquired Crown Books outlets has started smoothly. In addition to adding the former Crown stores in Washington, D.C., and Chicago, BAM will open five new superstores this year and eight Joe Muggs Newsstands.

The 9% sales increase posted by the three chains was slightly below the 9.7% gain recorded for the entire bookstore retail segment. The slower sales gain combined with the elimination of Crown dropped the chains' share of bookstore revenues from about 49% in fiscal 2000 to roughly 47% last year.

DiRomualdo to Step Down

In what the company said is the final step in a planned transition to a new management team, Bob DiRomualdo will step down as Borders chairman at the end of the year and be replaced by company president and CEO Greg Josefowicz. DiRomualdo will focus primarily on strategic and organizational issues, and he is expected to remain on the Borders board into 2002.

DiRomualdo joined Borders in 1989 and was CEO when Kmart, which already owned Waldenbooks, acquired the company in 1992. When Borders and Walden were combined in 1994, DiRomualdo assumed responsibility for both and played a key role when the company went public in 1995.

In a second major change in Borders's upper management, Kathryn Winkelhaus has been named president of merchandising and distribution, a position she has held on an interim basis for several months. Winkelhaus will relinquish her role as president of Borders Group stores, a post that gave her responsibility for the superstores, Walden and the international stores. No one will be named to succeed her, and Borders stores president Tami Heim and Walden president Ron Staffieri will report to Josefowicz. Winkelhaus will continue to oversee the international stores

Quarterly Bookstore Chain Sales ($ in millions)