Chains Slow Out of The Gate in '05

Total sales at the nation's three major bookstore chains rose 2.9% in the first quarter, ended April 30, to $2.06 billion. Books-A-Million, with sales up 4.7%, to $113 million, had the fastest-growing quarter, benefiting from an increase in comparable-store sales of 3.6%. Borders Group had the slowest growth in the period, as a 13% decline in music sales offset gains in book sales. The company said same-store sales for books rose in the low single digits. "The first quarter was a disappointment for us," Borders chairman Greg Josefowicz acknowledged in a conference call with analysts to discuss company results. Barnes & Noble's sales increased 3.7%, led by a 5% increase in superstore sales.

All three companies reported that while sales of bestsellers were soft in the quarter, the decline was more than made up for by increases in other segments. Bestseller sales at Borders fell 30%, but solid gains were recorded in the fiction (particularly African-American), children's, religion, business and graphic novel categories. At BAM, the best performing categories included fiction, children's, cooking, inspirational, teen interest and humor. B&N limited its remarks to noting that slower sales of bestsellers were offset by "solid business overall."

The release of Harry Potter and the Half-Blood Prince will bring increases at all three chains for the second quarter. B&N predicted that comparable superstore sales will increase by mid-single digits; Borders is looking for superstore same-store sales growth in the low single digits, but noted that excluding Potter, same-store sales will be flat, once again dragged down by slow music sales. Both B&N and Borders said they expect the vast majority of Potter's sales in the first few weeks after the book's release.

Both Josefowicz and B&N CEO Steve Riggio said they are encouraged by the lineup of new releases beyond Potter. Riggio called David McCullough's forthcoming 1776 "magnificent," and said fiction sales should get a boost from new works from Janet Evanovich, James Patterson and Terry McMillan.

B&N executives, led by Steve Riggio and company chairman Len Riggio, have long been the most outspoken industry members on the need to keep book prices down. So it was surprising to hear Riggio, during the quarterly analysts' conference call, say that over the next two to three years, "a little bit of price inflation can probably help the business." Riggio said that while price increases had been "out of contol" in the late 1990s, prices are now at a "good place," and that the industry could "benefit a bit from upward pricing."