B&N to Open 30 Stores, Consolidate Warehouses

Barnes & Noble will open 30 to 35 superstores in 2004 and spend up to $80 million over the next two years to consolidate its five New Jersey warehouses into one new facility, company executives told analysts in a conference call to discuss 2003 results.

The state-of-the art warehouse is expected to be ready by late 2005 or early 2006. The building, which will house inventory for the retailing, online and publishing units, will be located in New Jersey. In addition to opening as many as 35 new superstores this year, executives said, B&N will close 12 outlets and between 30 and 40 Dalton mall stores.

In reviewing 2003, company CEO Steve Riggio said he was pleased that the retailer was able to overcome a slow first quarter to finish the year with record sales. Total revenue in the bookstore segment rose 7.8%, to $4.22 billion, and operating income rose 15%, to $233 million. While he was happy with the gain in earnings, the "story [last year] was top line growth," Riggio said, noting that he was pleased that sales grew while B&N was able to cut inventory by 5%. Gains were led by hardcover bestsellers, while the DVD, magazine and cafe segments also performed well. Sales in B&N's self-publishing operation, which doesn't include revenue from Sterling, increased by double digits and added incremental sales while helping to improve operating margins, Riggio said.

He said that by the end of 2004 the company will be more than half way toward its goal of having the publishing unit generate 10% of sales. Another year of double-digit growth is expected for 2004. Riggio wouldn't be pinned down by analysts about how big he thought the publishing unit could be, reiterating that B&N's publishing program helps differentiate it from competitors and boosts results. "Every retailer would love to have exciting product that their competitors don't. On this front we stand alone," Riggio said. The publishing unit will introduce several new series and properties this year, including a new 1,700-page trade paperback baseball encyclopedia that will sell for $24.95.

Book sales, again led by bestsellers, were doing well early in 2004, Riggio said. He speculated that titles were benefiting from media exposure, and noted that Suzanne Somers's new book, The Sexy Years, had strong first-day sales, and he expected Donald Trump's new book, How to Get Rich, to be a huge hit. Both authors, Riggio said, are frequently on television and fit the model of "author as brand."

Looking at prospects for the entire company for 2004, B&N CFO Joseph Lombardi said the company expects same-store superstore sales to increase 2% for the year. After gains of 5% to 7% in comp-sale gains in the first quarter, Lombardi said comp sales will likely fall in the second quarter when faced with the huge sales of Harry Potter and the Order of the Phoenix in last year's second quarter. He said B&N was being "conservative" about business in the second half of the year, in part because of the Olympics and the presidential election, which in past years have resulted "in a blip down."