Industry Stocks Stumbled in 2000
Jim Milliot -- 1/8/01

With stock prices declining at 13 of the 22 companies included in the Publishers Weekly Stock Index, the PWSI fell 7.5% in 2000. The 7.5% drop was slightly more than the 6.2% decline posted in the year by the Dow Jones Industrial Average, but was much less than the 39.3% fall recorded by the Nasdaq. The decline of the Nasdaq market was largely due to the drop in prices of technology companies, and all the Internet-related companies that are in the PWSI saw their stock prices fall in 2000. E-retailers in particular were battered last year, with the industry bellwether,, suffering a 79.6% plunge in its share price, and its major competitor in the Internet bookselling market,, recording an even poorer performance--its stock price fell 90.8%, closing at $1.31 per share. Varsity Group, which went public in February at $10 per share, lost nearly all of its value in the following 10 months, to finish the year with its stock selling at 19 cents.

With the exception of Barnes & Noble, whose stock price rose 28.5% in the year, all book retailers had a difficult 2000. Borders Group stock price fell 28.1% in the year, while the stock
price of Books-a-Million fell 83.4%, to $1.38 per share. At the close of 2000, BAM was dropped from the S&P SmallCap 600 Index for "lack of representation." The stock price of Hastings Entertainment tumbled 70.9% to finish 2000 at $1.44 per share.
For all the hype about the new economy, it was old economy companies whose stock prices performed the best in 2000, including the two printing companies included in the PWSI; Banta Corp.'s stock price rose 12.7% in the year, and R.R. Donnelley's stock price was up 8.8%. Scholastic finished the year with the biggest gain, with its stock selling at $88.63 per share at the end of the year, a 42.5% increase. A strong first half of fiscal 2001 and bullish reports about the next several years have kept Scholastic's stock hot. Scholastic edged Harcourt General for top honors. Harcourt's 42.1% increase was due to its pending acquisition by Reed Elsevier. The improved financial results at Reader's Digest have been reflected in its stock price, which rose 33.8% in 2000, to $39.13.

Unlike 1999, when six companies had stock splits, Advanced Marketing Services was the only member of the PWSI to institute a split last year, although Scholastic will issue a two-for-one split later this month.

Worried About Borders
The poor performance of Borders's stock prompted the investor group Strategic Initiative Investors to present a proposal to the company late last month that calls for an amendment to Borders's bylaws that would require the retailer's five highest paid executives to be full-time employees. The proposal relates to the fact that Borders's chairman Bob DiRomualdo and vice-chairman George Mrkonic spend only about 50% of their business time on Borders's business.

SII, headed by Alan and Barry Lafer, said that depending on Borders's response to its proposal and the company's Christmas performance, it may nominate its own slate of directors for the company's board. Alan Lafer told PW that he believes Borders "is a very valuable company that is being penalized by a lack of vision from upper management." The investor group noted that while Borders has drained its cash to fund Internet activities, international expansion and the purchase of the poorly performing All Wound Up company, Barnes & Noble has "creatively pursued strategic alliances to finance its Internet activities," while also expanding into the e-book and video game markets.

While Borders has taken the SII proposal under advisement, early results for the quarter are not likely to quell shareholder worries. Borders said on Friday that earnings would be 10% below expectations and that company store sales would not hit the 3% target level. The company also said it was looking for a buyer for All Wound Up.