Borders Sales Drop Significantly
Book retailer Borders Group, Inc. experienced
significant reductions in sales during Q4 and fiscal year 2008 ended February 2, 2009, contributing to declines in net income and gross margin. Selected consolidated financial performance highlights follow.
Consumers Buy Fewer Books
Borders’ declining sales figures suggest consumers bought fewer books during 2008 than they did in 2007. For the fourth quarter, sales went down 12.9%, from $1.24 billion to $1.08 billion. Annual sales dropped 8.8%, from $3.55 billion to $3.24 billion.
On a comparable store basis, which Borders breaks down by its Borders and Waldenbooks formats, Borders sales declined 15.3% during the fourth quarter and 10.8% during the year. Waldenbooks comparable stores sales declined 4.7% during the fourth quarter and 5.1% during the year.
Lower Sales Equal Lower Net
Borders’ net loss and income results also got worse during Q4 and fiscal 2008. For the quarter, net income dropped 14%, from $74.3 million to $63.8 million. For the entire year, net loss increased by 395%, from $400,000 to $16.2 million.
Gross Margin Varies
During Q4 2008, gross margin declined 2.8%, from 31.6% to 28.8%. However, during fiscal 2008, gross margin improved 0.5%, from 24.3% to 24.8%.
Borders Closes Many Waldenbooks Locations
During fiscal 2008, Borders opened 12 Borders superstores and closed six, resulting in 515. The retailer also closed 112 Waldenbooks stores and opened eight, resulting in 490.
Some Good News
Borders was able to reduce some of its internal costs during the fiscal year. SG&A expenses went down $96.5 million and inventory was reduced by $326.8 million, resulting in cash flow from operations improving by $128.6 million.
Borders Has Mostly Rough Start to Fiscal 2009
Borders released no specific 2009 guidance, but said it expects continuing negative sales trends. Since the fiscal year started February 3, 2009, Borders has
laid off 742 employees and also says it will ask shareholders to approve a
reverse stock split at this year’s shareholder meeting in order to avoid delisting on the New York Stock Exchange. In one positive development, Borders yesterday received a one-year
extension on a loan that enabled it to maintain ownership of its subsidiary
Paperchase, a specialty stationery retailer that represents most of Borders’ international presence.
Competitors Also Feel Financial Heat
If Borders can take any comfort from its performance during the past fiscal year, it’s that other book retailers are also seeing declining results. Barnes & Noble
reported declines in total sales, profits and comparable-store sales for Q4 and fiscal year 2008, as did
Books a Million.
