Wednesday, August 29, 2007

Borders Reports Comp Stores Flat

Borders reported second quarter revenues of $945.1 which were up 10.4% over the same period last year. Superstore comp sales were up 4.6% but the Harry Potter book accounted for virtually all of this gain. The company reported a loss of .43 cents per share or .23 per share excluding non-operating charges. The street had been expecting .34cents a share on revenue of $916mm. In expectation of the results, which were released after the market closed the stock was down $.90.
"Progress is clearly being made at Borders Group as we continue to execute our strategic plan and are beginning to see improved performance," said Chief Executive Officer George Jones. "Harry Potter certainly gave us a big boost in sales across all businesses, yet even without it, we achieved positive same-stores sales results that are directly attributable to our focus on execution and more effective use of the Borders Rewards loyalty program to drive increased traffic to our stores. We have significantly more work to do, and we remain committed to staying on-track to deliver sales and earnings growth consistent with the long-term financial goals we set forth in our strategic plan."
Other items of note:
  • 2nd Q net loss of $25.1mm versus $18.4 last year. On an operating basis the loss of $15.3mm ($.26/share) compares with $14.5mm ($.23/share) last year
  • Gross margin increased by 1%
  • SG&A increased .9% due to non-operating charges: legal settlement expenses, promo discounts, higher expenses for 'strategic initiatives'
  • Debt net of cash was $662.9mm versus $476.7 in the same period last year
  • Comp Superstore sales were up 4.6% with HP; 0.4% without HP
  • Operating Income: On an operating basis superstores contributed $2.4mm in the quarter versus $10.4mm a year ago
  • Walden comp sales were flat excluding the Harry effect. Jones dangerously suggested that the improvement versus the last seven quarters was likely to continue.
  • Walden operating income was slightly better than last year which represents significantly better performance than the superstores.
  • Non Operating items included $3.5mm to settle a legal case in CA, severance costs for execs, store closure and relocation costs and professional fees.
  • The company also said it had adjusted some of its loan covenants to enable the sale of the international business and to potentially enable some refinancing options. The company also formally terminated the previously (surprising) announcement about seeking term financing of $150-200mm.


Press Release

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