Borders Q3 loss widens as same-store sales drop
Bookseller cuts inventory on CDs, DVDs
By Danny King -- Video Business, 11/26/2008
NOV. 26 | Borders Group's fiscal third-quarter loss widened 8.9% as the combination of less foot traffic, slumping music sales and lower inventory for books, CDs and DVDs pulled down same-store sales at the second-largest U.S. bookstore chain behind Barnes & Noble. Borders also said it's no longer for sale.
The company's net loss for the quarter ended Nov. 1 widened to $175.4 million, or $2.90 a share, from $161.1 million, or $2.74 a share, a year earlier, as sales fell 10% to $682.1 million, Borders said in a statement. Same-store sales at its U.S. flagship chain fell 11% excluding CD sales and 13% for all items. The company was expected to lose 50¢ a share on $726.5 million in sales, the average analyst estimate in a Thomson Financial survey.
Borders lost sales from both the economic slump, which also has hampered competitors such as Barnes & Noble, and from Borders' efforts to cut operating costs and debt by reducing inventory and cutting floor space dedicated to lower-margin categories such as music. Borders reduced its CD floor space to 7% of the store from about 11% a year earlier, chief financial officer Edward Wilhelm said on a conference call with analysts this morning.
Cuts in inventory helped Borders reduce its debt by 34% from a year earlier. The company didn't break out sales figures or how much it had lowered its DVD inventory.
"We had originally planned on a strong quarter, but that was before we encountered a retail environment by far the most pervasively difficult that I've seen in my 36-year career," Borders CEO George Jones said on the call today.
Last week, larger competitor Barnes & Noble said it had a fiscal third-quarter loss as same-store sales of books, DVDs and CDs fell on less foot traffic, caused by the economic slowdown. The retailer also said it would open fewer stores next year than it had previously planned.
Borders in March hired J.P. Morgan and Merrill Lynch to assess strategic alternatives, including a possible sale. The company today said it's no longer considering selling the company, though it might still sell its Paperchase Products stationary unit to Pershing Square Capital Management for $65 million.
