Fourth quarter sales at Borders were $1.1 billion overall, down 12.9 percent from a year ago. The superstores comprised $816.1 million, down 15.3 percent on a same-store sales basis (and book comps were down 11.7 percent), and 14.8 percent overall. Waldenbooks accounted for $195.6 million in sales, down a more modest 4.7 percent on a same-store basis, and down 14.3 percent overall. International sales added $43.2 million, and Borders.com did $26.4 million in business.
The company had net writedowns totaling $34.9 million in the quarter. Goodwill impairment was the largest charge, followed by store closures and severance costs. Adjusted income continued to fall, to a slim $28.9 million, compared to $67.3 million a year ago.
During the quarter, they had a net reduction of 4 superstores and closed another 84 Waldenbooks locations, finishing the year with 386 Walden stores in all and 515 superstores.
Perhaps the “best” news in the announcement is that Borders’ debt at year-end was $336.2 million, almost 40 percent lower than their $553 million in debt a year ago. Trade accounts payable declined in similar measure, standing at $350 million at year-end, down from $512 million a year ago. But, of course, the company is sitting on a lot less inventory, too: $915 million worth, versus $1.242 billion of stock a year ago. In this morning’s conference call the company said that book inventory had been reduced by $166.5 million. In their SEC filing, Borders said that as of January 31 they had another $194 million available under their line of credit agreement–but they make it clear that they “rely on vendor credit to finance approximately 43% of our inventory.”
For the full year, sales were $3.2 billion, down 8.8 percent overall. Superstore sales were $2.625 billion, as comps fell 10.8 percent (and books comps were down 8.2 percent); Walden sales were $480 million, with comps down 5.1 percent. International sales were $136.7 million, down by 5.8 percent, and online sales were $45.7 million over eight months of operation. The full-year loss ballooned $184.7 million, compared to a loss of $19.9 million a year ago, including after-tax, non-operating charges of $168.5 million.
SEC annual report
So what is new management’s plan for the coming year? New ceo Ron Marshall said in the earnings call “I came to the job fully appreciating the urgency and magnitude” of the challenges. The latest high-concept pitch from the retailer is that they want to be…a bookseller. Marshall talked about “re-engaging with our customers and reclaiming our status as a serious bookseller…and creating an editorial voice for our customers.” (The SEC filing echoes that “we are focused on improving key retailing practices at our superstores in order to become the bookstore for the serious reader.”
The new merchandising focus is “key items and ‘make’ books,” trying to turn “house favorites into national bestsellers.” They are citing Kelly Corrigan’s paperback of THE MIDDLE PLACE, which they say they had 59 percent market share on last week, and Jamie Ford’s HOTEL ON THE CORNER OF BITTER AND SWEET, for which they say they had 55 percent of the market last week. This summer they will add biography sections. Floor space vacated by music and dvds (for which comp sales fell 36 percent and 39 percent respectively) is being taken over in part by books, particularly children’s titles and bargain books, but also stationery. In the fourth quarter, they say children’s books had a positive 16.2 percent comp gain. Other growth areas for the serious bookseller are coffee, wellness, cooking, and educational materials.
Company executives would not specify how many Waldenbooks’ locations will be closed during the year ahead, but they signalled that the number could be large. A big 240 of the Walden’s leases are up within the next year. Marshall said “we have a lot of flexiblity in the Walden business right now” and added “we are making entirely unemotional decisions about our store base.” They noted “it’s not a particularly attractive business” and gave an indication that this part of the business could shrink to the 50 to 100-store range.
Publisher order cycles have advanced from every twelve weeks to every four weeks, and Borders says they will cut expenses in the year ahead by another $120 million.
Even so, the company warns of the difficulties ahead: “We believe that 2009 will be a challenging year due to continued uncertainty in the economic environment. We also believe that the increase in consumer spending via Internet retailers may significantly affect our ability to generate sales in our stores.”