Potter Spikes Sales, Chains Hope Magic Lasts

What a difference a book makes.

Even more than anticipated, the June release of Harry Potter and the Order of the Phoenix gave business at the nation's largest book chains a much needed jump start, revving up quarterly sales and igniting optimism that the momentum will carry over into the rest of the year.

Barnes & Noble, Borders and Books-A-Million all had significantly higher sales for the quarter—as measured by total revenue and by the all-important comparable-store book sales. While executives at the chains were quick to point out that Potter wasn't the only blockbuster in the quarter, they acknowledged the overwhelming effect the book had on sales.

Selling at 40% off list price, the book drove down profits as a percentage of sales. But booksellers' income still rose along with their revenues, and sales of higher-margin items helped protect their bottom lines.Booksellers said business continues to be brisk. And they touted a crop of releases for the fall and holiday seasons that they hope will have customers swarming the cash registers. "We think it's a very strong lineup of book products," said Clyde Anderson, BAM chairman and CEO.

Such comments provoke a shiver of déjà vu, given that a year ago booksellers were saying the same about the fall 2002 lists, only to be disappointed by sluggish sales. Nevertheless, B&N was so encouraged by the quarter ended August 2, as well by as the books on deck for fall, that it has raised its expectations for comparable-stores sales, projecting that they will rise 1% to 2% for the year.

B&N's comparable-store sales rose 5.1% in July—primarily on the strength of Harry Potter—and 5.6% for the quarter. Comparable-store sales even edged up at B. Dalton, rising 0.8% in July and 0.7% for the quarter.

"It's important to note that sales were strong throughout the entire second quarter," said B&N CEO Steve Riggio. "The uptick actually began with a strong Memorial Day, before Harry Potter."

Barnes & Noble's bookstore sales jumped to $977.6 million in the quarter ended August 2, a 10.5% increase compared with the second quarter of the prior year. That includes $912.6 million in superstore sales and $51.3 million from B. Dalton. The bookselling division had operating profits of $26 million for the quarter, up from $24 million during the comparable period the prior year.

At Borders superstores, a decline in music sales depressed overall comparable-store sales growth, keeping it at just 1.7% for the quarter ended July 27. But same-store sales spiked 8% in June, thanks to a 10% jump for books. At Waldenbooks, they rose 3.7% for the quarter.

Borders Group had total sales for the quarter of $826.9 million, an 8.3% increase compared with the second quarter of the previous year. That included $570 million from superstores, $168.7 million from mall stores and $88.2 million from its international outlets. Operating income increased to $9.8 million from $8 million.

The company is forecasting that total comparable-store sales will be flat for the year, as a 2% to 3% increase in book sales offsets a decrease in music sales.

Comparable-store sales jumped 6% for Books-A-Million during the three-month period that ended August 2, breaking a long string of quarterly declines

Sales of diet and health books increased 57%, thanks largely to The South Beach Diet and continued demand for books by the late Dr. Atkins. BAM's net sales for the quarter increased 9.1%, to $113.5 million. Operating income increased to $3.2 million, from $365,000 during the second quarter of the prior year.

Second Quarter Sales at the Largest Bookstore Chains
(in millions)