Chain Sales Rose 3.9% in Second Quarter, to $1.7 Billion

Total revenues from the nation's three largest bookstore chains increased 3.9%, to $1.75 billion, for the second quarter ended August 3. The increase was slower than the 4.8% increase recorded by the booksellers in the first quarter.

Bookstore sales at Barnes & Noble rose 5%, to $885 million, but operating profit slipped to $26 million from $28 million in last year's second quarter. Sales at the company's superstores increased 6.6% in the quarter, to $823.9 million. Comparable-store sales were up 0.3%, and the company added eight new superstores in the period while closing one. Sales at Dalton fell 13.5%, to $58.9 million, due to a combination of a 3.7% drop in same-store sales and the closing of 12 outlets.

B&N CEO Steve Riggio said the company was pleased with the quarterly results, explaining that "strong expense management enabled us to meet earnings in what remains a difficult retail environment." And although B&N said it is positioned to perform well in the second half of the year, it lowered its sales forecast for the rest of 2002. Citing recent retail trends, B&N is forecasting that comparable-store sales will increase 2%—3%, compared to a previous forecast of a 4%—5% gain.

Books-A-Million reported that total sales rose 0.7% in the second quarter, to $104.7 million. The net loss fell to $667,000 from $676,000. Comparable-store sales were off 1.2% in the quarter, although book comp sales were up 0.3%. BAM chairman Clyde Anderson said that while the company had expected nonbook sales to be soft, he was disappointed in book sales, particularly at the end of the quarter. Bestsellers did okay, but backlist sales were soft and sales in the computer book category continue to be "way off," Anderson said, while sales of business books are also slow. Bright spots included fiction, children's books, social sciences and cooking.

The company's remodeling program has also had a short-term negative effect on results, Anderson said, since sales tend to fall at stores that are undergoing renovation. In the long run, however, sales at the remodeled stores have outpaced the overall performance of the entire company. BAM has remodeled 26 outlets to date and plans to finish as many as 60 by year-end.

Anderson said he remains hopeful about a better second half of the year and cited the strong lineup of fall and Christmas books for his optimism. The company ordered 50,000 copies of Tom Clancy's newest, Red Rabbit, one of the highest orders BAM has ever placed. If the remainder of the year performs as expected, BAM believes earnings per share will be in the range of 29 cents to 31 cents, compared to last year's earnings of 24 cents per share.

Total revenues at Borders Group rose 3.2%, to $763.6 million, and net income increased to $3.4 million from $100,000 in last year's second quarter. Revenues at Borders superstores rose 3.6%, to $529.6 million, driven by the opening of seven new stores. Comparable-store sales were down 1%. Sales at Waldenbook fell 4.2%, to $168.3 million, as the company closed nine locations and same-store sales fell 0.6%. Sales in the international group jumped 23.7%, to $65.7 million.

Borders chief financial officer Ed Wilhelm said book comparable-store sales were flat in the quarter due to a slight decline in foot traffic that offset higher purchases per customer. Categories that fared well in the period included fiction, romance and cooking, while sales of computer, business and travel books were soft. Music also continued to be weak spot for Borders, with same-store sales off about 8%.

For the third quarter, Borders is projecting that comparable-store sales will be flat to up 1% at its superstores, with comp sales running flat to down 1% at Walden. In the fourth quarter, flat comp sales are projected for the superstores, while Walden comp-store sales are seen declining by low single digits.

Quarterly Bookstore Chains Sales
($ in millions)