Book Chain Sales Rose 6.9% in 2003

Driven by strong book sales in the fourth quarter of 2003, total revenue at the nation's three major bookstore chains rose 6.9% for the year, to $8.41 billion. The increase was significantly better than the 3.5% gain reported in 2002.

Barnes & Noble had the biggest gain, with sales at its bookstores up 7.8%, to $4.22 billion. Operating income in the year rose 15.3%, to $233 million. Borders Group, which reported results earlier this month, had a 6.1% sales increase to $3.7 billion with net income up 7%, to $120 million. Sales at Books-A-Million rose 5% last year, to $460.2 million, and net income jumped to $7.2 million from $1.4 million in 2002.

Steve Riggio, B&N CEO, said sales in 2003 were led by solid gains in the book segment, particularly bestsellers, which had "tremendous success" in the year. As previously reported, sales at B&N's superstores rose 8% in the year, to $3.9 billion, with same-store sales up 3.2%. The company opened 31 new B&N superstores and closed 12 last year. Sales at Dalton fell 15% in 2003, to $221 million, due to the closing of 63 outlets and a 2% decrease in same-store sales. The B&N sales figure includes results from its publishing operation, and the company noted that sales from "self-published product" rose by double-digits.

At BAM, same-store sales were up 3.3%, and book comps were strong, said BAM president Sandra Cochran. "It was all about books," particularly in the fourth quarter, Cochran said, explaining the sales gain for the year. Diet and health, fiction and graphic novels were among the top-selling categories, Cochran said. Sales were also up in BAM's cafe and gift and stationery businesses. Its online operations "met expectations," Cochran said, adding that the unit will have a small loss in the year.

The retailer will open eight to 10 new stores in 2004 and will remodel 20 to 25. The new stores will be about 15,000 sq. ft., said chairman Clyde Anderson. BAM didn't provide a sales forecast for the year, but said it does expect earnings per share to grow between 12% to 15.5%. Strong first and fourth quarters will counter difficult second and third quarters, which benefited last year from the huge sales of Harry Potter and the Order of the Phoenix.

Borders's future growth will come primarily from higher sales at existing stores. Chairman Greg Josefowicz said Borders "knows its comparable-store performance must increase." To help achieve that goal, Borders is "re-orienting" its capital expenditures toward remodeling stores rather than opening new ones. While the company plans to open 18 to 20 superstores in 2004, it will refurbish 40 to 50 stores this year, investing $300,000 to $400,000 on each store. Based on past experience, Borders expects comp-store sales to increase by 5% at its remodeled stores.

The company will also invest selectively to upgrade some Walden outlets, while closing 30 to 40 stores in the chain. Executives said that only about 40 to 50 Walden stores are now unprofitable, and most of those will be closed this year.

In its international operations, Borders will open six to eight new stores annually over the next several years. The company said it is also in discussions with Amazon.com about the e-tailer taking over operation of Borders's international online business, similar to the way it has done in the U.S.

B&N said it expects same-store sales at its superstores to increase 5%—7% in the first quarter, in part because of easy comparisons to a weak first period last year. For the full year, superstore same-store sales are projected to increase 2%. Earlier this year, Borders projected same-store sales at its superstores will rise "in the low single digits" in 2004.

Bookstore Chain Sales, 2002-2003
(in millions)