Borders posted results last night and ,well, not great, but better than expected in some areas…
Borders posted a loss of 53 cents per share vs a 63 cent loss last year. Same-store sales at Borders U.S. superstores, or sales at stores open at least a year, fell 4.1 percent. Total consolidated sales, at $784.7 million, were down 1.0% over a year ago. At Borders domestic superstores, comparable store sales for the period decreased by 4.1%. Without the impact of music, same-store sales at Borders domestic superstores decreased by 1.7% for the quarter. The music decline was expected as Borders has made the decision to dramatically scale back operations there.
The really encouraging news was that debt was reduced to $591.9 million at the end of the first quarter from $722.8 million at the end of the year-earlier quarter and cash flow improved by $133 million.
“Considering the overall conditions, we were pleased,” said CEO George Jones. “The sales environment was tough. We did a much better job managing inventory, we reduced our debt in the quarter by $131 million, and we had a big increase in cash flow.”
Why not be discouraged?
The new website just went up a started yesterday. It will be a profit center this year and if you have not been there, it has been done very well.
Here is a video of the new site:
Also, the new store concept has only begun to roll out. Initial reports are very encouraging and given the rate at which they are opening new ones, one can only assume that what management is seeing it likes, a lot.
All in all, modest results and pretty much what one should have expected given the retail environment out there. That being said, one must look 2 quarters out for any real confirmation that the plan is working. By that time more new concept stores will be open so we will have additional evidence on them and the website will be functioning for 6 months, enough time to make preliminary observations on its effectiveness.
All this assume the company is still independent by then….. by no means a certainty
Disclosure (“none” means no position):Long BGP
2 replies on “Borders Results: Bland and Good”
My 2 cents worth
–Borders is only opening 14 concept stores this year (assuming they can get the New Orleans store open this year). Not much out of 500 superstores. To open more would require cap ex spending and they are cutting that to the bone possibly to the point that they are deferring needed maintenance. I wish an analyst had asked how many concept stores they plan for next year, but the analysts didn’t even know who’s running Borders cafes, so they aren’t going to be much help.
I read on a Borders employee board that the company has indefinitely postponed upgrading the Waldenbooks register system, so despite the fact that B&N has abandoned the mall segment of the business and that Waldenbooks SSS were better than Superstores it looks like Borders will abandon that segment too.
The International sales have grown nicely, but they don’t break out the profitability of those sales or how much the dollar’s weakness helped. It certainly looks like Borders most valuable asset but again the analysts didn’t ask anything about it on the earnings call.
Shrinking inventory and more importantly reducing debt may make them more attractive for a buyer, but I still don’t see much benefit to B&N in buying them. Who else would take Borders? Beats me.
The Web site looks fine. I like the magic shelf thingy, but I don’t think most analysts share your enthusiasm on the impact on the bottom line (as the analyst at Clusterstock said–Unfortunately, it’s more likely Borders will now be able to fail at two businesses instead of one.), and even the company said in the earnings call that they don’t expect it to be accretive until 2009.
So far, it looks like the market is taking the negative view too.
anon,
i believe it is fy2009, or the year ending in Jan..