Barnes & Noble Set Sales Pace in 2004

Total revenue at the nation's three largest bookstore chains rose 5.1% in 2004, to $8.81 billion. The increase last year was slower than the 6.9% gain posted by the three companies in 2003, as fourth-quarter sales grew at a slower rate in 2004 than in 2003.

Barnes & Noble had the fastest growth in the year, with sales at its bookstores rising 5.5%, to $4.45 billion; total sales rose 4.8%, to $4.87 billion, as sales from B&N.com slipped to $420 million from $428 million. A one-time charge resulted in a decline in net income for the entire company, to $143.4 million, compared to $151.8 million in 2003.

Sales at B&N's superstores rose 5% in the year, to $1.4 billion, driven by a 3.1% increase in same-store sales and the opening of 32 new outlets. Dalton's sales fell 20% in the year, to $176.5 million, due to a 3.2% decrease in comp-store sales and the closing of 41 stores.

While many industry members see the huge number of titles released each year as a problem, B&N CEO Steve Riggio said that, lacking a major new hit in 2004, it was the wide variety of books available that drove gains last year. Citing "strength in numbers," Riggio said that between B&N's stores and Web site, the company sold more than one million unique titles in 2004. Riggio said B&N's publishing program accounted for 5.5% of bookstore sales ($245 million) in 2004, and added that by being close to customers and examining "overt [sales] trends and undercurrents of demand," he sees "tremendous opportunity" to publish new books.

Riggio defended the performance of B&N.com, saying the e-tailer provides incalculable advertising support for the stores, and asserting that the 3.1% comp-store sales gains (the best among the big three chains) was due in part to the company's "multichannel strategy." Both Riggio and CFO Joe Lombardi played down B&N.com's lack of profitability in 2004 (and possibly again in 2005) by noting the e-tailer fits in with improving the profitability of the entire chain.

Looking at 2005, Lombardi said B&N will open 30 to 35 superstores, while closing about 12. The company will also close about 40 Dalton outlets, dropping the store count for the mall-based chain to about 114. Projections call for same-store sales at the superstores to increase by about 3% this year, with sales at B&N. com also projected to increase 3%.

A major undertaking for the company this year is the opening of its new distribution center in central New Jersey. The company took possession of the facility this month and will begin transferring inventory from five other warehouses in the second quarter. B&N expects to begin shipping books from the center before the holiday season, although the transfer of inventory will extend into 2006. The company will spend about $40 million on the facility this year, costs that will cut into earnings.

Earnings Up at Borders

Borders, which previously reported a 4.9% sales increase (News, Feb. 14), to $3.88 billion, had a 14.5% increase in net income last year, to $131.9 million. In 2005, the company will open 15 to 20 superstores and expects same-store sales to increase by low single digits. Borders will close approximately 40 Waldenbooks outlets this year, and projects same-store sales to decline in the low single digits. International sales are forecast to increase 20%; new store openings include the first store to be opened in Malaysia in the company's franchise deal with that country's Berjaya Group.

Bookstore Chain Sales, 2003—2004
(in millions)