Music Gives Chains Holiday Headache

Holiday sales reports from the nation’s three major bookstore chains last week indicated that book sales were decent in the nine-week period ended January 5, but that poor music sales hurt the overall performance of the retailers. Borders Group said that book comps at its superstores rose 3.4% during the holidays, but same-store sales of music dropped 12.9%, resulting in an overall 2.4% increase in same-store sales at its superstores. Barnes & Noble was a bit vague on how books performed, noting that while comp sales at its stores were down 0.4%, sales excluding music comps were up 0.8%. Books-a-Million, which carries little music, had the largest overall sales gain in the period, although comp-store sales were flat.

Both Borders and BAM noted that the retail environment was extremely competitive over the holidays, with BAM president Sandy Cochran commenting on “softening economic conditions.” B&N and Borders also said that holiday trends would result in lower than anticipated earnings for the fourth quarter. B&N cited slower than expected sales in reducing its fourth-quarter profit forecast, while Borders said the “intensely promotional” shopping environment resulted in lower earnings than forecasted.

Wall Street did not react well to B&N’s news, with the stock price falling 19% the day it announced its lower forecast. Borders’s price, however, rose 3.9%.