Chain Sales Rose 3.5% in 2002, to $7.80 Billion

Total bookstore sales from the nation's three largest chains increased 3.5%, to $7.80 billion, for the year ended February 2, 2003. The increase is only slightly lower than the 3.7% increase recorded in the previous year.

As in fiscal 2002, the fourth quarter was the weakest period in the year, with sales up 1.4% compared to a 1.6% gain in the previous year. Retailers, in fact, were counting on the soft sales in last year's fourth quarter to give them a chance to post solid gains in the most recent last quarter. The disappointing performance was attributed to the weak economy, which kept customer traffic down at both superstores and mall stores. And despite one of the strongest lineups of top-name authors in recent years, bestselling titles did not reach sales levels of a year ago at any of the three chains.

Barnes & Noble had the largest sales increase in the year, with revenue up 4.5%, to $3.85 billion. Sales at Borders Group rose 2.8%, to $3.51 billion, while sales at Books-A-Million were virtually flat at $442 million. Executives at both B&N and Borders have said that they are looking for only modest top-line growth for this year, although they expect earnings to rise at a faster pace.

Executives at Books-A-Million are withholding comments on the outlook for 2003 until the company's new auditors, Deloitte & Touche, have re-audited results for the previous two years. BAM is also delaying release of its final figures until Deloitte & Touche finishes the audits. BAM said the new audits change the way revenue from its Millionaire's Club card is accounted for. Under its previous auditor, Arthur Andersen, BAM recorded the revenue when it was received, but Deloitte will amortize the revenue over the 12-month life of the card. BAM said the new audit is not likely to materially affect results at the company, although after-tax earnings are projected to be reduced by $44,000 in fiscal 2001 and $60,000 in fiscal 2002. BAM has already reduced after-tax earnings by $35,000 for the most recent fiscal year.

The new audit will not change the fact that BAM had a disappointing fourth quarter, which contributed to a disappointing year. In addition to flat sales, net income fell to $2.7 million compared to $4 million in fiscal 2002. (Until the audit is completed, BAM is not issuing official comparisons to fiscal 2002 in case restatements need to be made; fiscal '02 numbers reported here are from last year's financial reports.) In the fourth quarter, sales were $139.6 million, compared to $143.6 million in last year's final period, and earnings fell to $6.1 million from $6.9 million.

BAM CEO Clyde Anderson cited a soft economy for weaker than expected book sales in the quarter. Sales of children's books were down, and several bestselling authors had poor sales performances, Anderson said. Sales were up in the diet and health and entertainment book categories and also increased in BAM's collectible segment, led by the sale of Yu-Gi-Oh trading cards.