Two of the nation's three largest bookstore chains posted modest gains for the first quarter ended May 5, 2001. Bookstore sales at Barnes & Noble increased 4.3%, to $807.9 million, led by a 6.7% gain in superstore sales, which hit $738.6 million. Comparable-sales figures at the superstores, however, came in slightly below estimates, at 2.3%. Dalton's same-store sales were off 1.8%. At Books-a-Million, total revenues rose 4.7%, to $97.5 million, but comparable-store sales were down 6.8% in the quarter, largely due to the strong performance of Pokémon products last year. Excluding Pokémon, same-store sales were up 0.2%.
Total sales at B&N, including its Babbage's division, rose 12.9% in the period, to $1.01 billion, but the company's net loss rose to $11.5 million from $4.1 million, due in part to a one-time $4.5-million charge related to legal costs associated with the American Booksellers Association lawsuit. Earnings before interest, taxes, depreciation and amortization in the bookstore group fell to $47 million from $53 million. To help improve earnings, B&N chairman Len Riggio said that the company has implemented a "very aggressive expense reduction program" designed to save $30 million over the course of the year. He said cost cuts will be made throughout the company, including such areas as payroll, overhead and distribution. Savings will come from productivity gains; no layoffs are expected. The lower expenses will help B&N's superstores meet earnings targets for the year, despite its forecast of same-store sales growth of 2.5%—3.5%, down from the previous forecast of 4.0%—4.5%.
Looking back on the first quarter, Riggio noted that sales began on a strong note, but "fell off the cliff" in the last three weeks of April. Sales have rebounded in May, however, with comp-store sales ahead by 3.9%. During the quarter, B&N's children's and bargain books category did well, as did the music category and cafe operation. Sales of computer books were down 10%.
The modest sales gains at BAM resulted in a net loss of $415,000 in the quarter, compared to net income of $471,000 in last year's first period. BAM is expecting more unfavorable comparisons in the second quarter due to Pokémon, but expects results to improve in the second half of the year. "The worst of Pokémon is behind us," said BAM chairman Clyde Anderson, adding that BAM continues to expect earnings to finish the year 30% ahead of profits in fiscal 2001.
Anderson said BAM's core book business had a solid quarter, led by double-digit growth in its children's department as well as strong sales of The Prayer of Jabez, which was the chain's top seller in the quarter. The company's Internet operations had a "powerful" quarter, with sales ahead of budget and losses down significantly. Anderson said he expects BAM's online segment to become profitable very soon. Because of its purchase of 18 Crown Books outlets (11 in Washington, D.C.; 7 in Chicago), BAM did not open any new stores in the period. The integration of Crown has gone as planned, Anderson said, noting that the remodeling of some of the larger stores will begin in the next few months.
Anderson said he is "feeling pretty good about the summer" and is particularly optimistic about the book business. In addition to a strong lineup of titles, Anderson said investments in new systems should improve inventory management and help control costs. In a further bid to become more profitable, BAM has removed unprofitable music departments from about 30 stores and has sharply reduced the number of foreign newspapers it carries, Anderson reported.
