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Borders, B&N Both Report Sales Gains of 15% in Quarter
-- 11/24/97
Superstores spur increase; B&N stresses smaller role of bestsellers as part of growth
The two largest bookstore chains both reported sales gains of 15% in the third quarter ended October 26. Barnes &Noble also provided an unusual glimpse of the types of books that are selling in its stores.

The 15.4% increase in sales at B&N pushed third-quarter sales to $614.8 million. The gain was led by a 22% increase in sales at its superstores, where sales hit $503.7 million; comparable store sales rose 9.3%. Same-store sales at Dalton fell 0.4% in the quarter. In the quarter, B&N reported net income of $65,000, compared to a net loss of $2.4 million in last year's third period.

During the quarter, B&N opened 16 superstores and closed one, while it opened three Dalton outlets and closed six. The company also said that during the quarter, sales of bestsellers represented less than 3% of total sales, while sales of titles from smaller publishers, independent and university presses continued to grow. In addition, B&N maintained that "purchases from the top 10 publishers declined to 46% of the total, compared to 74% three years ago." B&N said these trends "reflect a wider range of consumer interest in less-known works of serious fiction and nonfiction than has been previously recognized."

For the nine-month period, B&N reported a 17.3% increase in sales, to $1.83 billion, while its net loss was cut in half, from $10.7 million to $5.2 million. Comparable store sales for its superstores were up 9.7% in the nine months, while comp-store sales at its mall outlets were down 2.7%.

The strong financial performance helped B&N close an $850-million senior credit facility last week with a syndicate led by Chase Manhattan under more favorable terms than its previous agreement. Proceeds will be used for general corporate purposes and to redeem $190 million of 11 7/8 senior notes.

How Borders Fared

Meanwhile Borders sales also rose 15.4%, to $477.3 million, in the third quarter, and the company reported net income of $400,000, a slight improvement over the break-even quarter it had anticipated two weeks ago (News, Nov. 10). This is compared to a $2.7 million loss in the same period last year. The sales gain was led by a 31% increase in sales at Borders' superstores, where sales were $283.2 million. Sales at Walden fell nearly 2%, to $194.1 million.

So far this year, sales have risen 14.2%, to $1.4 billion, with net income of $1.3 million, compared to a net loss of $8.4 million in the same period last year. Borders attributed its improvement to "continued gross margin improvement and expense control, partially offset by strategic initiatives"-a reference to its recent purchase of the U.K.'s Books etc. for about $66 million and the opening of its first superstore abroad, in Singapore. Sales at the superstores were up almost 30%, to $821.9 million, while Walden's sales were off 2.3%, to $585.3 million. During the third quarter, the company opened 18 more superstores, for a total of 189.

At its mall division, Walden, sales continued to shrink as a part of the whole, from 48.6% a year ago to 41.6%. Borders has closed a total of 41 Walden outlets during the year, and now has 927.

The company also noted that its inventory of book, music and video titles grew by 13.6% during the year, and now stands at $870 million.
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