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Borders Group loss narrows in 1st quarter
May 27, 2008 7:49 PM ET
Borders said its same-store sales fell and its losses narrowed in the first quarter, and Wall Street greeted Tuesday's relaunch of the bookseller's retail Web site with a selloff of its shares.

Ann Arbor-based Borders Group Inc. said it lost $31.7 million, or 53 cents per share, in the three months ending May 3, compared with a loss of $35.9 million, or 61 cents per share, for the comparable period of 2007.

Thomson Financial said analysts had expected a loss of 47 cents per share.

The nation's No. 2 retail bookseller behind Barnes & Noble Inc. released its earnings after the close of trading Tuesday. Its shares fell 47 cents, or 7 percent, to $6.25 in regular-session trading Tuesday and dropped another 4 percent to $6.00 in after-hours dealings.

The company says its results were hurt by store closure costs, severance costs and fees related to strategic alternatives.

"It was a tough sales environment we did it in," George Jones, Borders chief executive, told The Associated Press.

Jones said a restructuring announced last year is expected to save $120 million a year and already has significantly improved Borders' cash flow. He said the cuts and the launch of the Web sales site will pay off in months to come.

"You're going to see an interplay of the online world with the brick-and-mortar world," he said. "If we do the right things, it will create value for our shareholders."

The bookseller says its revenue fell 0.8 percent to $792.5 million from $798.7 million. Analysts anticipated $801.1 million.

Same-store sales at domestic superstores fell 4.1 percent.

"It's fairly obvious the book business is under pressure from surging gas prices, consumer balance sheet repair and reduced traffic to casual dining establishments," analyst David Schick of Stifel Nicolaus & Co. said last week in note to investors.

Deutsche Bank North America's Dave Weiner also said in a note last week: "We continue to believe that brick (and) mortar book retailing is fundamentally challenged, as price-leading competitors (including the Internet) take share."

Barnes & Noble last week reported a loss of $2.22 million on sales of $1.16 billion in the quarter ended May 3.

Borders announced in March that it was putting itself up for sale, and Barnes & Noble said Thursday that it had assembled a management team to study the feasibility of a combination with Borders.

The Borders earnings report came hours after the company relaunched a Web sales site that it turned over to Amazon in 2001 because of losses. Under that arrangement, Borders.com took shoppers to a site partnered with Amazon, while a Web site for its stores allowed shoppers to check inventories and reserve items.

Borders has said it expects the new Borders.com to be independently profitable in 2009.

One analyst was skeptical.

"Borders hopes that taking its site in house will compensate for its sputtering bricks-and-mortar store business. Unfortunately, and more likely, Borders will now be able to fail at two businesses instead of one," wrote Corey Lorinsky of Clusterstock.

Borders Group operates about 540 Borders superstores in the U.S., Australia, New Zealand, Singapore and Puerto Rico. It also has about 485 Waldenbooks outlets. The company employs about 30,000 people worldwide.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080527&id=8694066