Borders Profits Up, Outlook Raised

Tue Aug 17, 2004
By Anupama Chandrasekaran

NEW YORK (Reuters) - Borders Group Inc. (BGP.N: Quote, Profile, Research) , the No. 2 U.S. bookseller, on Tuesday said quarterly earnings rose, beating estimates by the company and Wall Street, as a looming presidential election whetted appetites for political books and led to higher-than-expected sales.

Borders, which competes with top U.S. bookseller Barnes & Noble Inc. (BKS.N: Quote, Profile, Research) and the Web's biggest retailer, Amazon.com Inc. (AMZN.O: Quote, Profile, Research) , also raised its full-year forecast and said it plans to renovate up to 50 stores to increase customer traffic.

The Ann Arbor, Michigan-based company said profit rose to $8.5 million, or 11 cents a share, from $4.5 million, or 6 cents a share, a year earlier. Per-share earnings got a boost partly because there were a fewer number of shares outstanding in the 2004 quarter compared with the 2003 quarter.

The results were better than Borders own forecast of 6 cents to 8 cents for the second quarter and analysts average estimate of 7 cents a share, according to Reuters estimates.

Sales rose 2.4 percent to $847.1 million, driven by promotions of as much as 30 percent off on select titles as well as advertising, in the company's top markets such as Chicago, Detroit and Cleveland, Chief Financial Officer Ed Wilhelm told Reuters.

"Political books continued to sell well for us," Wilhelm said. He added that former President Bill Clinton's 957-page memoir, "My Life," continues to be a top seller at its stores, as is "The 9/11 Commission Report," which was released in July, but this title hasn't raked as much revenue because of its low price point of around $10.

Looking ahead, Borders expects to earn between 1 cent and 3 cents a share for the third quarter.

For the full year, the company said it now expects to earn $1.72 to $1.77 a share, higher than its previous range of $1.70 to $1.75 a share. The full year earnings per share view includes an after-tax charge of 4 cents to 6 cents a share.

Wilhelm said Borders plans to continue its share buyback program. In addition, the company plans to renovate and remodel 40 to 50 stores at a cost of $350,000 per store, the CFO said.

One of the design changes planned is a race-track-like path to make it easy for customers to navigate through the store. Borders expects these changes to lift sales by 5 percent in these stores.

The company, which has more than 1,200 stores worldwide, will be expanding its presence in Britain and Australia. Borders is also looking at India, which has a big English-speaking population, although there is no specific plan in place yet, Wilhelm said.

Shares of Borders closed 42 cents, or 1.92 percent, higher at $22.32 in Tuesday trading on the New York Stock Exchange.

 

 

More Financial News