With the country in the grip of the worst economic crisis since the Depression, publishers and booksellers are hoping for the best but preparing for the worst. In a conference call discussing third-quarter results, Amazon issued a broad forecast for the crucial fourth quarter, saying sales could increase anywhere between 6% and 23%, a forecast that was slightly lower than previous guidance. CFO Tom Szkutak said Amazon, along with most of corporate America, has “limited visibility” about the economy and how consumers will behave in the fourth quarter. In the third quarter, Szkutak said, sales slowed late in the period, with sales of products over $1,000 slowing the most.
Overall, Amazon's total sales rose 31% in the period, to $4.26 billion, while North America media revenue rose 15%, to $1.24 billion. All the sales gains are below the increases posted in the second quarter; the company said some of the reason for the slower growth was strong sales in July 2007 of Harry Potter and the Deathly Hallows. Net income jumped 48%, to $118 million.
During the conference call, Szkutak and Amazon founder Jeff Bezos repeatedly said they believe Amazon will come through the fourth quarter fairly well because of its low prices and free shipping. “I love our position as a low-cost provider,” Bezos said.
Despite slower growth in the third period, Amazon is performing much better than the traditional bookstore sector. Through August, total bookstore sales were up 2%, and by all accounts, sales were very weak in September. But publishers and booksellers who may be hoping for a rebound in October are likely to be disappointed, given historical trends. A five-year analysis of bookstore sales in the September—November period finds sales in October have dropped by at least 28% from September every year since 2003. There is hope for November, however, as sales in that month have increased over October every year since 2004 and rose 8% in 2005, 2006 and 2007.
A November rebound will be too late for year-old Comics and Classics in Jacksonville Beach, Fla., one of a new generation of bookstores recently profiled in PW (Oct. 6), which appears set to become a victim of the credit crunch. According to co-owner Kimberly Johnson, the current economic squeeze, coupled with a drop in sales over the past two months, have forced her and her husband, co-owner Percy Johnson, to consider closing the combination bookstore, comics shop and art gallery as early as mid-November.
“There aren't small business loans,” said Kimberly Johnson. “It used to be that you could be open six months and get a loan. Now you have to be open two years.” An added economic problem, she noted, has been Percy's recent layoff from his job as a pharmaceutical sales representative. On October 19 Comics and Classics posted a 911 on its Enthusiasmos blog, which stated that the store is looking for full or partial buy-ins. Interested parties may contact Johnson at email@example.com. If no investors step forward, the Johnsons plan to liquidate the store, and Kimberly will return to teaching.
|Source: U.S. Census Bureau|
|*Dollars in billions|