Tuesday, May 27, 2008

Borders First Quarter: Sales Down Cash UP

Borders Group, Inc first fiscal quarter, total consolidated sales, at $784.7 million, were down 1.0% over a year ago. Borders domestic superstores comp sales for the period decreased by 4.1%. Excluding music, same-store sales at Borders domestic superstores decreased by 1.7% for the quarter. Waldenbooks comp store sales decreased by 0.8% over the same period a year ago. International segment increased by 3.1% in the first quarter.

Improvement in Cash Flow:

Cash flow from operations improved by $132.9 million for the quarter compared to a year ago due in large part to improved inventory management,which generated $88.9 million in cash in the first quarter. Inventory decreased by $188.4 million at cost from the same period a year ago. Debt was reduced by $130.9 million compared to the prior year, including the prior year debt of discontinued operations. Commenting on the results CEO George Jones said:

"As was the case with nearly every other retailer, the challenging overall consumer environment hampered sales performance in the first quarter. I am pleased, however, that even within this difficult retail climate, we were able to manage inventory well, begin to aggressively reduce expenses, and end the quarter with better bottom line results than would have been expected in this type of environment. In fact, we worked with a third party advisor to develop a plan to reduce our annual operating expenses by$120 million, giving Borders a new, more effective base operating model going forward. We expect to realize about half of these savings within the current fiscal year and the full amount in 2009. We also
substantially improved cash flow and reduced debt in the first quarter -- both of which are critical factors in achieving our long term financial goals -- and as we announced in March, we completed financing to support our short term goals. While we have seen an improvement in sales in recent weeks, we will continue to aggressively execute expense reductions and manage our business conservatively, putting us in a much better position for long term success."

Press Release

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