Soft Start for Bookstore Chains

The first quarter for the nation's three largest bookstore chains was less than impressive, a period that lacked both a hot new release and media-driven events to drive customers into stores. As a result, total sales at Barnes & Noble, Borders Group and Books-A-Million rose only 1.5% in the quarter, to $2.09 billion.

In conference calls with analysts, executives from all three retailers attributed poorer than expected sales to a weak lineup of new releases that led to soft sales of hardcover bestsellers. Exacerbating the absence of exciting new books was a slow news cycle and no major media-driven hit. As BAM president Sandy Cochran noted, author appearances on Oprah and the Food Network produced few bestsellers in the period. The outlook for the stores in the second period is not bright, compared to strong sales of Harry Potter and the Half-Blood Prince last July. All three chains said same-store sales will be down in the period—probably in the low single digits—but only BAM said it was taking action to lessen the impact of Potter. "We have an aggressive marketing plan" to try to overcome Potter's stong sales last year, Cochran said.

Although B&N and Borders both reported a 1.5% sales increase, Borders's superstores posted a 0.7% increase in same-store sales at its superstores, compared to a 0.3% decline at B&N's superstores. Borders president Greg Josefowicz said higher customer traffic was the reason behind the improvement, which was led by a 2% increase in same store sales of books. As at B&N, store traffic at Borders slowed considerably in mid-April, and while B&N said business picked up in May, Borders's executives said traffic was still soft. Excluding Potter sales, Borders said that comp sales at its superstores would be about flat in the quarter compared to a decline of low single digits with Potter.

Same store sales at Waldenbooks will be down in low double-digits, or down in mid-single digits excluding Potter. Walden's sales were particularly hurt by weakness in hardcover bestsellers, falling 11.1% due to a combination of 16 store closings and a 7.3% decline in same-store sales. Borders CFO Ed Wilhelm said the company will continue to shut Walden outlets until it "rationalizes the store base." There are now 665 Walden stores, 140 of which have been rebranded as Borders Express stores. While the rebranding effort has improved sales, the company will not add any more Walden stores to the program until it determines which stores it wants to keep open.

Borders's international operations also had a difficult first period, with sales up only 1.4%. Unlike the U.S., where music sales dragged down overall store numbers, soft sales in the U.K. were due to weak book results, which Josefowicz attributed in part to increased competition.

Despite the disappointing first quarter and what will be a soft second quarter, all three chains expect better results in the second half of the year. Josefowicz pointed to a stronger release schedule, particularly in fiction, in the last six months of the year as one reason for his optimism. BAM hopes to see some lift in sales over the summer from movie tie-ins, including Pirates of the Caribbean, Running with Scissors and The Devil Wears Prada.

Bookstore Chain Sales, 2005—2006
(in millions)