Borders Posts Quarterly Loss on 12 Percent Decline in Revenue
Borders Group Inc., the second- largest U.S. bookstore chain, posted a loss for the fifth time in six quarters as revenue at established stores kept dropping and profit margins declined on increased discounting.
The net loss widened to $46.7 million, or 67 cents a share, in the second quarter ended July 31, the Ann Arbor, Michigan- based company said today in a statement. Sales at stores open at least a year fell 6.8 percent, the 10th straight drop. Total revenue sank 12 percent to $530.4 million.
As more people shop online instead of at stores, the retailer is looking for ways to revive profitability that include a pay option for its rewards program and selling items from Build-A-Bear Workshop Inc. Borders also cut its store count by almost half in the past three years by closing U.S. locations and selling off international operations.
“While many have written us off, we still have a commanding market share and we’re refocusing a brand that has 100 million customers walking through its doors every year,” Chief Executive Officer Michael Edwards said in a telephone interview. “With the transformation in the industry and the distractions occurring at our competitors, we’re very grounded on our financial objectives and restoring the company to profitability.”
Borders fell 4 cents, or 3.7 percent, to $1.04 at 4:04 p.m. in New York Stock Exchange composite trading. The stock has declined 12 percent this year.
The company raised capital in the second quarter by selling $25 million of shares to Bennett S. LeBow in a private transaction. LeBow, the cigarette executive, became the largest shareholder and was made chairman. The retailer also sold its Paperchase chain, based mostly in the U.K., to private equity firm Primary Capital Ltd. in July for $31 million.
Those actions helped the company reduce its net debt, the difference between debt and cash, to $262.1 million from $303.6 million at the end of the first quarter, the company said.
The loss from continuing operations widened to $51.6 million from $45.1 million a year earlier as profit margins fell 3.7 percent from an increase in discounts, the company said.
Online sales rose 56 percent to $15.5 million from a year ago. Lower prices, the introduction of text books and a faster checkout system, drove the gain, Edwards said. E-books, which the company began offering in July, and e-readers weren’t part of the increase because most e-readers are bought in physical stores and it was too early to see a lift from e-books, Edwards said.
Barnes & Noble Inc., the largest U.S. bookstore chain, posted a net loss of $1.12 a share on Aug. 24 for the three months ended July 31. The company put itself up for sale last month and is engaged in a proxy contest with investor Ron Burkle.