First quarter sales at Borders fell 12.1 percent overall at $641.5 million, with same-store sales down 13.5 percent at the superstores and down 5.5 percent at Waldenbooks. Superstores and Borders.com comprised $536.7 million of sales, with just $76.9 million coming from the 376 Waldens open at the end of the quarter. International sales, primarily from Paperchase, fell 14.9 percent to $27.9 million, suffering from the fall in the pound.
The company lost $15.9 million or 27 cents per share on an operating basis–better than last year’s loss, and better than the 50-cent loss analysts expected–but the total loss was $86 million in all, incorporating a variety of “non-operating adjustments” totaling $70.1 million, comprising mostly non-cash charges. The company slashed capital expenditures to $2.4 million from $27 million a year go, and debt stands at $325.9 million. (Debt is just $10.3 million lower than it was two months earlier, though inventories fell by more than $22 million.)
Once again, the release tries to portray improvement, even as sales continue to fall and losses continue to pile up. New ceo Ron Marshall says in the announcement, “We continued to strengthen the financial structure of the company by making further improvements to cash flow, debt and adjusted EBITDA. Make no mistake about it, we have much more work to do and will continue to maintain our financial discipline. At the same time, we know that we cannot save our way to prosperity. Our long-term success will come from doing a much better job of driving sales and that’s where our focus is right now.” Marshall told the WSJ, “There are some real execution issues that we have to deal with front and center,” he said. “We have to be a more effective promotional retailer. Our in-store execution also has to be crisper. There’s a laundry list of things we need to work on.”
In this morning’s conference call with investors, Marshall once again emphasized their “organizational shift to a selling culture” and directive for store personnel to make “personal connections with the customer” and “share their book recommendations,” noting that “handselling is nothing new but the results can be dramatic.”
After “the company dramatically reduced inventory” last year as the primary means to bring down their debt it “left us with gaps in our backlist selection that frankly continues to hurt sales,” but Marshall indicated they were starting to refill empty shelves. “New product is flowing into our stores,” he said, and “by the end of June we’ll be restocked.” He did warn, however, of “some momentary disruptions and possible impact on sales” in the meantime.
Borders continues to highlight children’s books in general as a growth area, and the “explosion in young adult” books in particular. “Even without Stephenie Meyer, young adult was up 18 percent on a comparable basis.”