Chain Sales Rose 4.8% in First Quarter, to $1.7 Billion

Total sales at the country's three largest bookstore chains rose 4.8%, to $1.71 billion, for the first quarter ended May 4. Barnes & Noble's book division had the largest gain, with sales increasing 6.6%, to $861 million. Superstore sales rose 8.1% in the period, to $798.6 million, due to a 2.5% increase in comparable store sales and the addition of eight new locations. Closing seven stores plus a 1% decline in same stores sales resulted in a 9.8% decline in revenues to $60.4 million at B. Dalton in the period. Operating income for the bookstore group fell to $9 million from $19 million in the comparable period last year.

Borders Group reported that total revenues for the first quarter rose 3%, to $751.7 million. Net income in the period was $3.9 million compared to a net loss of $18.9 million in last year's first quarter, a figure that included extraordinary items of $19.5 million.

First quarter sales at Books-A-Million rose 3.8%, to $101.2 million, in the period ended May 4, and the net loss was cut to $366,000 from $415,000. The sales gain was driven by a 3.1% increase in comparable store sales for all book categories, while sales in nonbook areas, particularly music (which BAM has discontinued) and collectibles, fell.

BAM chairman Clyde Anderson said the book gains were driven by strong fiction sales led by John Grisham's The Summons. The history and biography segments also had strong gains, and Anderson said those two segments as well as fiction continued to perform well early in the second quarter. Anderson said BAM expects to build on the "positive trends" in its book business in the second quarter. "There's a pretty good lineup of product out there," he said, specifically pointing to books related to the Star Wars and Spiderman movies. Anderson also expects good sales from new releases by Jan Karon, James Patterson and Mary Higgins Clark.

Executives at Borders said the company's book business had a solid quarter, with sales in the second half of the quarter particularly strong. New title releases were credited with improving book sales, and the publication of The Shelters of Stone has helped the second quarter get off to a good start. Sales were also strong in Borders's DVD and gift and stationery segments. Sales were off in music, with comparable-store sales down 7% for the quarter. A weak new title schedule was seen as the main reason for the poor performance by the music category, and executives were not expecting noticeable improvement until the second half of the year at the earliest. Music accounts for about 20% of Borders's revenues, and although officials said they remain committed to the category, they acknowledged that music titles could lose some floor space to the faster growing DVD and gift and stationery segments.

Revenues at the company's superstore division increased 3.6% in the quarter, to $518.5 million, and net income rose 30%. The opening of six new stores helped to offset a 0.4% decline in same-store sales. Borders chairman Greg Josefowicz said that while he "was not fully satisfied" with the performance of the superstores, Borders gained market share from nontraditional outlets in the quarter by grabbing more sales of bestsellers.

Waldenbooks performed better than expected, turning in an operating profit of $1.4 million compared to a loss of $1.2 million in last year's first quarter. Sales fell 3.8%, to $170 million, as a result of the closing of seven outlets and a 0.2% drop in same-store sales. Lower occupancy costs and higher transactions per customer helped improve the segment's bottom line. Borders still plans to close a total of approximately 40 Walden outlets in the year.

Sales in the company's international division increased 20%, to $63.2 million, and Borders operated 58 stores abroad.

With the exception of music, Josefowicz is encouraged about the prospects for all of Borders's segments for the second quarter and the year. Second quarter comparable-store sales are expected to increase 1% to 2% at Borders, with same-store sales at Walden projected to be in the flat to –2% range. Josefowicz is expecting a boost for DVD sales this quarter with the release of Harry Potter and the Sorcerer's Stone. And he said he was "impressed" with the fall lineup of books presented by publishers at a "productive" BEA, which should translate into a good second half of the year. For the full year, comparable superstore sales are expected to increase 2% to 3% with Walden same-store sales running from flat to down 1%.