A yearlong trend of disappointing sales of bestsellers, combined with an overall weak economy, led to a 7.3% drop in sales at Advanced Marketing Services, to $164.2 million, for the second quarter, ended September 29, 2001, although cost-cutting helped net income inch up to $3.71 million from $3.68 million.

Company president Michael Nicita said that sales of bestsellers released in September were down between 5% and 35%, noting that it has been about one year since bestsellers hit sales projections. In mid-October, bestsellers, as well as sales through warehouse clubs, were showing "some strength," Nicita said, but he added that AMS couldn't say for certain whether this was the beginning of a long-term trend or just a blip.

The slow sales led to an increase in AMS's return rate, which was 24% in the most recent quarter compared to 17% in last year's second quarter. To help bring returns down, Nicita said AMS has reduced the initial laydown on many titles, although he was "hopeful" the company would see more reorders.

Both Nicita and AMS chairman Charles Tillinghast reported that its global distribution division, Advanced Global Distribution, has made solid progress since it was launched six months ago. AGD now has 10 domestic clients, and its international units have grown at a rapid pace, in particular Australia's Bookwise operation, which now has more than 90 clients compared to 40 at the beginning of the year. Nicita said he expects to add more clients over the next several months.

Commenting on future results, Nicita observed, "Even though publisher offerings for our current third fiscal holiday quarter are much stronger than last year's... recent register trends and the year's related events make the third quarter a difficult one to accurately forecast at this point." He noted that, at present, the company still expects to have earnings per share in the $1.16 to $1.19 range for the full year.

Sales for the first six months fell 4.3%, to $311.2 million, although net income increased 2.0%, to $6.8 million.