Borders tries to write happy ending
ANN ARBOR, Mich. Book retailing remains a tumultuous marketplace with quarterly results from Borders today suggesting the road ahead will remain challenging.
For starters, Borders reported net and operating losses that were worse than the prior year as sales declined 17.7% to $617 million during its second quarter ended August 1. The company ended the period with 513 Borders stores and 370 Waldenbooks locations. Same-store sales declined 17.9%at Borders superstores, on top of a 9% drop the prior year, and 10.8% at Waldenbooks specialty stores. Comps at Borders only declined 13%if the multimedia category is excluded.
“The second quarter was a transitional one as we made significant space and inventory reductions to strategically position declining categories for profitability while further developing businesses that have potential,” said Borders Group CEO Ron Marshall. “While this transition impacted sales in the short run, our stores are now better positioned to drive improved sales in the back half of the year. Further, we are pleased that even with the level of transformation we undertook in the second quarter, our financial disciplines remained intact and we continued to strengthen our balance sheet by cutting debt, generating positive cash flow, reducing inventory and tightly managing working capital. The big changes for the year are behind us now and the challenge is to deliver on the opportunity we have created to drive sales.”
The weakness in Borders numbers was seen as a modest positive for Barnes & Noble, according to Stifel Nicolaus analyst David Schick, because Barnes & Noble now faces a more benign profit environment in the short to medium term as a result of Border’s difficulties.
“This dynamic does nothing to alleviate the larger concerns we believe are fair and continue to monitor that (Barnes & Noble) faces substantial pressure from competitive forces and secular trends,” according to Schick, who notes that Walmart, Target, Costco, Amazon and E-readers all present competitive challenges at a time when consumers of all age cohorts reading less due to Internet usage.