Major Book Outlets Report Disappointing Holiday
Jim Milliot -- 1/15/01
While overall sales were up at some companies, comparable store results were weak
Holiday sales at the nation's major bookstore outlets were disappointing. While total sales were up at Barnes & Noble and Borders, the gains did not meet earlier forecasts and comparable-store sales gains were below expectations. Sales at Amazon. com and Barnes & Noble.com were closer to expectations than those of the physical stores, though neither company impressed Wall Street. Comparable-store sales were down at Musicland's On Cue and Media Play divisions, as well as at Zany Brainy. Results for independent booksellers were mixed, although a majority reported that sales were up in the period.
Barnes & Noble reported that sales at its superstores for the nine-week period from October 29 to December 30 increased 6.1%, to $763.7 million, but comparable-store sales rose only 1.3%. The performance at B. Dalton was worse, with sales down 15.5%, to $107.9 million, and same-store sales off 3.3%. Sales at B&N's Babbage's division increased 35.2%, to $255.4 million, but comparable-store sales were down 12.5%. B&N attributed the weakness at Babbage's primarily to the shortage of PlayStation 1 and PlayStation 2. Based on the shortfall in revenues, the company said that fourth-quarter earnings at its bookselling operations would be about $1.30 per share, compared to earlier estimates of $1.46 per share, and the video-game unit per share estimates have been lowered to 6 cents per share, compared to 33 cents.
B&N chairman Len Riggio said he was "obviously disappointed by sales for this holiday season." Riggio speculated that the "election fiasco seemed to be a significant cause of the shortfall, since sales dropped dramatically the day after the election and remained soft until the issue was resolved." Riggio said sales in January were "right on track" with the company's forecast of a 4% gain, and added that while the increase will not make up for the holiday shortfall, it is "a good sign nonetheless."
Total sales at Books-a-Million fell 3.5% in the nine-week span, to $102.3 million, and comparable-store sales tumbled 9.1%. The chain attributed the decline to the lack of a replacement for PokÃ©mon product, which sold very well in last year's holiday season; excluding PokÃ©mon comparisons, same-store sales were down 2.3%. Unlike B&N's Riggio, BAM president Sandra Cochran said January "will be a tough month," and company chairman Clyde Anderson added that he expects same-store sales comparisons to be adversely affected by PokÃ©mon sales through the second quarter.
Anderson said he was disappointed with the results, observing that the holiday rush "came late and wasn't as large" as the company had hoped. Bright spots included strong sales of children's and Beatles-related products. Anderson said that its Internet sales did "extremely well" in the period and that its fulfillment agreement with Wal-Mart was on track. The weak sales results mean that BAM's fourth-quarter earnings per share will be between 27 cents and 30 cents, compared to 36 cents in last year's fourth quarter.
Comps Down at Borders
Earlier this month, Borders Group said it expected that fourth-quarter operating earnings would be 10% below forecasts, due to lower than expected sales and reduced margins. Fourth-quarter comparable-store sales at the company's superstores are projected to be up only 1%, compared to a projected 3% increase, while comparable-store sales at Waldenbooks are projected to fall 4% from last year's quarter, compared to a previous estimate of a 2% decline. The results at Walden do not include All Wound Up, the kiosk toy operation that the company is looking to sell. "All Wound Up will not be part of the Borders Group in 2001," company president Greg Josefowicz said. Borders acquired All Wound Up in 1999 for $18 million. "Obviously, with a disappointing year, Borders Group will be looking at every element of our business to assess what further changes or restructuring will be needed to help drive shareholder value," Josefowicz said.
Crown Books reported that total sales and same-store sales were down about 3% for the November-December period. Company chairman Charlie Cumello cited the lack of big books and slow store traffic as the reasons behind the decline.
Amazon.com reported that it expects sales for the fourth quarter to register a 42% increase, to $960 million, and company chairman Jeff Bezos said he was satisfied with the results, even though Amazon failed to crack the $1-billion mark, as many analysts had expected. The 42% increase was at the lower end of Amazon's forecast of sales between $950 and $1.05 billion, and indicated to some analysts that Amazon's growth was slowing. The company did not break out book sales, noting only that books remains its largest category, followed by electronics.
BN.com expects fourth-quarter sales in 2000 to exceed $103 million, a gain of 36% from the fourth quarter in 1999. Sales for the full year are forecast to be $318 million, a 65% gain over 1999. Company vice-chairman Steve Riggio said he was pleased with the sales growth and said he believes the company is taking market share away from Amazon.com. Despite the sales gain, the company is expecting its per-share loss to be in the $1.05 to $1.08 range, higher than expected. BN.com said the wider loss was due to the inclusion of costs associated with the purchase of Fatbrain.com, as well as marketing expenses associated with its Yahoo! marketing agreement. Books about the Beatles were among the e-retailer's bestsellers, and the boxed set of Harry Potter titles also sold well, BN.com reported.
Sales at the multiple-media store Zany Brainy increased 6.5% in the eight-week period ended December 24, to $169 million. Comparable-store sales, however, fell 6%. Zany president Thomas Vellios cited strong sales of PokÃ©mon last year as a major reason for the decrease in same-store sale results. Excluding PokÃ©mon and the recently acquired Noodle Kidoodle, same-store sales were up 7%. Internet sales rose 5% in the period without heavy marketing costs, prompting Vellios to predict that when ZanyBrainy.com is fully integrated with its retail stores, Zany Brainy Direct (which includes its mail-order business) "can be a positive cash contributor to our business in 2001."
Total sales at Music Play and On Cue fell 2.2% in December, to $154.9 million, with comparable-store sales off 8.2%.
Volume 247 Issue 3 01/15/2001