Chain Sales Rise 6% in Second Qtr., to $1.7 Billion

Total revenues at the country's three largest bookstore chains rose 6.1%, to $1.69 billion, in this year's second quarter, slightly surpassing the 5.7% sales gain achieved in the first quarter. Barnes & Noble and Books-A-Million both had better growth rates in the most recent period compared to the first quarter, although the sales growth at Borders Group slowed from 7.4% to 5.9%. For the first half of the year, total chain revenues were up 5.9%, to $3.32 billion.

As was the case with B&N and BAM (News, Aug. 27), superstore sales led the gains at Borders Group, with revenues up 10.1%, to $511.1 million. Comparable superstore sales were up 2.0% in the quarter, and the company added eight new superstores in the period. Superstore sales were led by gains in gift and stationery products, DVDs and special orders. Sales of computer books remained soft. Net income for the superstores was $8.4 million, up from $6.7 million, attributable to "strong expense discipline," said company president Greg Josefowicz.

Sales at Waldenbooks failed to hit projections, and total revenues slid 5.7%, to $175.6 million. The group had an operating loss of $1 million, down from operating earnings of $300,000 in last year's comparable quarter. Same-store sales were off 5.5%, as Walden was hurt by slow mall traffic and the strong sales of Harry Potter and the Goblet of Fire a year earlier. The company closed seven Walden outlets in the quarter, to finish with 855 stores at the midpoint of the year.

B&N's mall stores also had a weak period. Revenues at Dalton "sputtered" in the quarter, B&N chairman Len Riggio said. But with Dalton accounting for only about 8% of retail sales, its results have only a marginal impact on the overall company, Riggio explained. Dalton had 330 stores at the end of the second quarter, and Riggio said the company plans to close 40 to 50 a year until it reaches a base of approximately 200.

Borders's international sales rose 10.4%, to $53.1 million, and the net loss was $4.4 million, compared to $3.8 million in the same period in fiscal 2001. The company currently has 17 Borders superstores abroad and will open four more this year, including three in Australia.

In the quarter, Borders had net income of $100,000 on total sales of $739.8 million, compared to break-even on sales of $698.4 million in last year's first half.

Asked what impact the settlement of the ABA lawsuit could have on future results, Borders executives said that, with the issue behind the company, an opportunity for more "constructive dialogue" with its trading partners has been created. The agreement has also made it more conducive for trading partners to have discussions to "mutually seek benefits in the buying and selling relationship. We've been energized by what the settlement has allowed us to do," executives said. The remarks from Borders echoed those made by Riggio, who noted in the prior week that B&N tries "to arrange for our own terms in the context of what is legal."

Borders executives said they were confident that net earnings would rise by 19% for the full year. Comparable superstore sales are projected to be up 3% for the third quarter and for the full year, while same-store sales at Walden are expected to decline 1% 2% for the current quarter and full year. B&N is forecasting a 2% 3% increase in same-store sales at its superstores in the third quarter and a 4% 5% gain in the fourth quarter. Same store sales at Dalton are estimated to fall 2% 3% in the third quarter and 1% 2% in the year's final period.

Quarterly Bookstore Chain Sales (in millions)