Chain Sales Rise 8.7% in Third Qtr., To $1.8 Billion

Following a second quarter in which sales at the nation's three major bookstore chains jumped 9.4%—due in large measure to Harry Potter and the Order of the Phoenix—sales in the third period ended November 1 rose a healthy 8.7%, to $1.84 billion. It was the largest increase for the chains in a non-Potter quarter in at least two years. The biggest gain in the quarter was reported by Barnes & Noble, whose sales increased 9.7%. Sales at Borders Group rose 7.7%, and revenue at Books-A-Million were up 6.6%. Total chain sales for the first nine months of the year increased 6%, to $5.47 billion. Executives at all three retailers were generally optimistic that this holiday season could be the best one in several years.

Sales at B&N's bookselling group hit $926.2 million for the third quarter ended November 1. The company's superstores posted a 9.6% sales gain, to $859.4 million, with comparable-store sales up 4.5%. The company opened 13 new superstores in the period. Sales at Dalton fell 14.9%, to $44.2 million, due to a decline of 1.3% in same-store sales and the closing of three outlets. Net income for the bookselling group jumped to $6.9 million from $1.4 million.

Company CEO Steve Riggio said sales were "very strong" in all product segments, including books, music, DVDs and cafe. With the improvement in sales trends, B&N raised its expectations for the fourth quarter and is now looking for same-store sales to increase in the 4% to 5% range at its superstores.

Weak Comps at Borders

Total sales at Borders Group reached $807.9 million, driven largely by new store openings. The company had net income of $500,000, compared to a loss of $1.8 million in last year's third quarter. Results in the most recent period benefited from a $600,000 insurance settlement related to the loss of Borders's World Trade Center store.

Sales at its superstores rose 7.8%, to $551.7 million. Comparable-store sales rose only 1.5%, as strong gains in books, DVDs and gifts were partially offset by a decline in music sales. The company opened 16 superstores in the quarter. Sales at Walden fell 2%, to $161.5 million, as a 1.3% improvement in same-store sales was offset by the closing of nine outlets. International store sales increased 29%, to $94.7 million.

Borders had a much more muted forecast for the fourth quarter, predicting that same-store sales will be flat at both its superstores and Waldenbooks. Still, company chairman Greg Josefowicz noted that comparable-store sales had improved every month in the third quarter, leading him to believe that "this holiday season will be an improvement over last year."

In some good news for investors, Borders announced that, beginning in January, the company will be paying a quarterly dividend; first payment will be 8 cents per share.

BAM's 6.6% sales increase was spurred by a 4.4% increase in comparable-store sales. The gain in same-store sales, combined with less discounting and stronger sales in high-margin areas such as cafes, helped to lower the chain's loss in the period to $755,000 from $2.7 million in last year's third quarter.

BAM chairman Clyde Anderson said he was "extremely pleased" with the results, noting that both book and nonbook categories performed well. He credited the solid gain in comparable-store sales to "one of the best title lineups in years." Diet and health was the strongest performing category, led by The South Beach Diet and The Ultimate Weight Solution. The Da Vinci Code, Bleachers and The Wedding did well in fiction, while The Purpose-Driven Life was the top seller in the inspirational category. A revamping of BAM's graphic novel section led to a big spike in sales in that category.

Anderson was optimistic about prospects for the fourth quarter. He said a number of books, such as The Da Vinci Code and diet books, "were still working." Those titles, as well as the publication of several big books in the holiday season, are "expected to lead to improved comparable-store sales versus last year's fourth quarter," Anderson said.

For the first nine months of the year, sales rose 4.6%, to $315.4 million, and the net loss was reduced to $436,000 from $4.5 million. Same-store sales were up 2.6%.

Quarterly Sales at the Largest Bookstore Chains
($in millions)