Borders Results Decline; Company Sale Off
-- Publishers Weekly, 11/25/2008 4:19:00 PM
Borders continued to struggle with its top line performance in the third quarter, although the retailer did manage to cut expenses and lower its debt and inventory compared to one year ago. Total sales at the chain fell 10%, to $693.4 million, and the company posting a net loss of $172.2 million for the period. The loss includes a series of one-time charges totaling $133.2 million, and excluding those charges the loss was about even with last year’s third quarter. Comp sales fell 12.8% at its superstores and 7.7% in the Waldenbooks specialty group. Music sales were especially weak in the quarter and excluding music same store sales were still off 10.6%. The comp declines were higher than those reported by Barnes & Noble (7.4%) and Books-A-Million (9.9%), and sales came in below analysts' expectations.
Borders also announced that it is no longer for sale. Company CEO George Jones said that after completing a thorough review of its options, the company determined it was best “to remain as we are,” adding that he was “quite pleased” that the review is over and that Borders will remain an independent, publicly-traded company. The company still has the option to sell its Paperchase division to Pershing Square Capital, Borders’s largest shareholder, for $65 million. That option expires Jan. 15. The company said it is talking to Pershing about different financing arrangements.
Similar to its competitors, Borders blamed a lack of customer traffic for the decline in sales, noting that the drop was most significant in September and October. Jones said the higher decline in comp stores compared to its competitors was due in part to its aggressive inventory reduction program which he acknowledged cost some sales. Jones said the decision to prune slow moving titles from Borders's store shelves was the right one, although he acknowledged the program "was not perfect." The company is starting to "fine tune" its inventory program and may return some books to stores, Jones said. According to Jones Borders is "well stocked" for the holidays. "It's a tough retail environment, but we feel we'll get our share of sales," Jones said.
The bad economy also contributed to a shortfall in sales expected for Borders.com which hit $11.3 million in the quarter; because of the weaker than expected sales, Borders no longer expects its e-commerce arm to breakeven for the year.
