Stores Say Soft Market Will Continue

Without a new title able to compete with last year's Harry Potter and the Deathly Hallows, sales declines were expected at the bookstore chains in this year's second quarter, but what was more troubling to publishers was that executives at both Barnes & Noble and Books-A-Million indicated that they see no signs of a turnaround this year. B&N said it expects comparable-store sales in the third quarter to decline in the low single digits, and the nation's largest bookstore chain revised downward its forecast for full year comp sales from “slightly negative” to a comp decrease in the low single digits. Comp sales in the second quarter were down 4.7%, or 1.5% excluding Hallows. “It's a soft market,” said B&N CFO Joseph Lombardi. Books-A-Million didn't provide a specific forecast, but president Sandy Cochran said the chain foresees few changes in what will be a challenging third-quarter marketplace. In the second quarter, comps at BAM fell 10.4%, and Cochran said customer traffic was down, with consumers being very cost-conscious. Both B&N and BAM said that while the biggest decline came in the Potter week, sales were generally soft throughout the quarter.

B&N CEO Steve Riggio tried to take some of the sting out of the second-quarter numbers, noting that the company's core book business, excluding Potter, was about flat. He attributed the overall store decline primarily to a double-digit drop in music sales, and music sales are expected to continue to decline at that rate. Riggio pointed to Barnes & Noble.com as a bright spot, noting that without Hallows, its $99.8 million in second-quarter sales was 13.9% above the comparable period in 2007. Because of the general softness, B&N is delaying some projects and will cut capital spending from a projected $220 million to $210 million. The retailer will still open 30 to 35 new stores this year, but will scale back its plans for 2009 and will open only 20 to 25 new stores. Riggio blamed the cancellation of new malls by developers for B&N's reduction in store openings. BAM opened six new stores in the quarter and said it is on track to open 15 to 20 stores for the full year.