Borders Group Loss Rises, Sales Fall
Ann Arbor-based Borders Group Inc. (NYSE: BGP) said Wednesday that its loss grew to $46.7 million in the second quarter ended July 31 from $45.6 million in the same quarter a year earlier.
Sales were $526.1 million, down 11.5 percent from a year earlier. Sales at stores open at least a year fell 6.8 percent.
The company said sales at its Web site, Borders.com, grew 56.2 percent from a year earlier to $15.5 milion.
Debt net of cash was up 2.7 percent from a year earlier to $262.1 million.
"While we continue to succeed in strengthening our financial structure, we are highly focused on driving profitable sales and increasing market share," said Mike Edwards, CEO of Borders. "Based on extensive consumer research, we are doing a number of things to excite our customers going into the critical holiday shopping season, including launching our new Borders Rewards program, which includes the new paid Borders Rewards Plus. Recognizing that online and digital will be a significant part of our business moving forward, we are focused on increasing our share of the eBook market by growing our digital offerings to position Borders as the preferred destination for digital reading. Yet as we grow our online and digital business, we cannot underestimate the importance of our brick and mortar presence. This will be top of mind as we work on improving the in-store experience by shifting our product mix to include additional non-book products that are both compelling and relevant, and providing an escape for our customers though an inspirational in-store environment and consistent customer service."
As a percent of sales, gross margin decreased from 23.0 percent to 19.3 percent in the second quarter, resulting from increased promotional discounts and the de-leveraging of fixed occupancy costs caused by negative comparable store sales.
Selling, general and administrative experiences fell $22.7 million to 26.5 percent of sales from 27.3 percnet in the quarter a year earlier. The company credited "aggressive expense reduction and store closure efforts."
Capital expenditures rose to $7.7 million from $1.2 million a year earlier, concentrated on the Borders e-book store and spending on 'Area-e' shops. Borders will complete its digital initiative with the roll out of its Area-e digital shops, which will conclude in early October. The shops will provide an enjoyable environment where customers can experience a variety of different eReaders, guided by knowledgeable staff, who can demonstrate the devices and answer questions.
To listen to a replay of the conference call discussing the results, which will be available through Sept. 15, call (800) 642-1687 in the United States or (706) 645-9291, passcode 91309569.
More at www.borders.com.
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