Borders Group Announces Second Quarter Results
PR Newswire - August 12, 1998 07:43
BGP %REA %PUB %MLM %ERN V%PRN P%PRN
ANN ARBOR, Mich., Aug. 12 /PRNewswire/ -- Borders Group, Inc. (NYSE: BGP) today announced results for the second quarter of fiscal 1998 ended July 26, 1998. The Company reported net income of $2.4 million or $0.03 diluted earnings per share compared to $0.5 million or $0.01 diluted earnings per share in the second quarter of 1997. Management attributed the improvement over last year's performance to continued gross margin improvement and expense control, partially offset by spending on strategic initiatives including Borders.com and international expansion.
Consolidated sales for the quarter were $546.0 million, a 17.1% increase over the prior year sales of $466.3 million. Borders sales increased to $339.6 million, a 25.8% increase over last year sales of $269.9 million. The sales increase at Borders reflects an increase in the number of stores during the preceding 12 months from 171 to 213. On a comparable store basis, Borders sales increased 5.4%. Waldenbooks reported sales of $186.3 million, a 3.9% decline from prior year sales of $193.9 million. Sales results at Waldenbooks reflects a comparable store sales decrease of 2.5% and a reduction in stores from 929 to 899 over the prior 12 months. (A softness in Waldenbooks sales in May negatively impacted the quarter; excluding May sales, the comparable sales decrease was 1.2% compared to the first quarter comparable sales decrease of 0.9%).
Consolidated gross margin rose to 25.6% of sales for the second quarter of fiscal 1998 compared to 24.7% for the second quarter of fiscal 1997. Management attributed the increase in gross margin to a number of factors, including continued improvements in buying, distribution and inventory shrinkage results. Selling, general, and administrative expenses as a percentage of sales increased slightly to 23.9% from 23.8% due to increased spending on strategic initiatives.
Inventories increased to $888.8 million in the second quarter of fiscal 1998 from $719.4 million in the second quarter of 1997, a 23.5% increase. The increase was primarily due to 42 more Borders stores, the addition of the fulfillment center and Books etc. which occurred in the later part of fiscal 1997, earlier receipt of calendar merchandise and earlier staging of stores to be opened in the third quarter. Short term debt net of cash and cash equivalents was $246.7 million at quarter-end compared to $55.2 million last year. The increase in borrowings primarily reflects the Books etc. acquisition, share repurchase activity, fixed asset additions and typical working capital requirements.
In commenting on second quarter results Robert Di Romualdo, Chairman and CEO, said "We are pleased to report the Company's seventh consecutive quarterly profit. Separately, the second international Borders Books and Music superstore opened successfully on August 1 in London. An additional three international stores are planned to open later this year, two in the United Kingdom and one in Australia."
-- FINANCIAL TABLES ATTACHED --
Safe Harbor Statement
Certain of the statements set forth above are forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements are based upon management's estimates, assumptions and projections and are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, consumer demand for the Company's products, which is believed to be related to overall consumer spending patterns and, with respect to the mall business, overall mall traffic; an unexpected increase in competition; higher than anticipated interest, occupancy, labor, distribution and inventory shrinkage costs; unanticipated adverse litigation results; unanticipated work stoppages; higher than anticipated costs associated with the closing of underperforming stores; unanticipated incre!
ases in the cost of the merchandise sold by the Company; the performance of the Company's new strategic initiatives, including the Internet and international expansion; the stability and capacity of the Company's information systems; unanticipated costs or problems relating to the Company's Year 2000 compliance; changes in foreign currency exchange rates; and the continued ability of the Company to locate and develop suitable sites for its superstore expansion program.
Borders Group, Inc. is the world's second largest retailer of books, music, and other informational, educational, and entertainment products. Borders Group, Inc. includes Borders, Inc., over 200 superstores, with cafes, offering what is widely regarded as the broadest books and media assortment in the industry; Waldenbooks, the United States' leading mall book retailer, which operates almost 900 stores serving all 50 states; Borders Online, Inc., the Company's e-commerce service operating under the domain name Borders.com; and, Borders (UK) Limited, which operates 23 Books etc. stores, a leading retailer of books in the United Kingdom. Borders Group, Inc. subsidiaries operate in the United States, the United Kingdom, and Singapore. Borders Group, Inc. trades on the New York Stock Exchange under the symbol of "BGP."
Information: For general information, including copies of this or other reports, please fax or mail your request to the attention of the Investor Relations Dept.; Fax, 734-477-4538; 100 Phoenix Drive; Ann Arbor, MI 48108-2202. Information can also be obtained via the Internet by visiting the Borders web sites at bordersgroupinc.com or via fax by calling Company News On-Call at 800-758-5804, ext. 106169. More information about Borders Book & Music stores, including store locations, directions, national and selected store specific events and job opportunities, may be found at bordersstores.com.
BORDERS GROUP, INC. FINANCIAL STATEMENTS (dollars in millions, except per share amounts)
Sales and Earnings Summary
Quarter Ended Year-to-Date
July 26, July 27, % July 26, July 27, %
1998 1997 Change 1998 1997 Change
Borders $339.6 $269.9 25.8% $674.6 $533.4 26.5%
Waldenbooks 186.3 193.9 -3.9% 378.0 391.2 -3.4%
Other 20.1 2.5 702.2% 38.6 5.3 627.4%
Total sales 546.0 466.3 17.1% 1,091.2 929.9 17.3%
Cost of goods
sold, incl
occupancy 406.1 351.1 15.7% 811.5 701.9 15.6%
Gross margin 139.9 115.2 21.4% 279.7 228.0 22.7%
Selling, general
& admin.
expenses 130.5 111.1 17.5% 260.3 221.5 17.5%
Pre-opening
expense 0.8 1.6 -50.0% 1.1 1.9 -42.1%
Goodwill
amortization 0.7 0.2 250.0% 1.4 0.5 180.0%
Operating
Income 7.9 2.3 243.5% 16.9 4.1 312.2%
Interest expense 4.0 1.4 185.7% 6.7 2.4 179.2%
Income before
taxes 3.9 0.9 333.4% 10.2 1.7 500.1%
Income taxes 1.5 0.4 275.0% 4.0 0.8 400.0%
Net income $2.4 $0.5 380.2% $6.2 $0.9 589.0%
Diluted EPS $0.03 $0.01 $0.07 $0.01
Basic EPS $0.03 $0.01 $0.08 $0.01
Diluted weighted
avg. common
shares (000's) 83,449 82,651 83,238 82,260
Basic weighted
avg. common
shares (000's) 76,682 76,286 76,227 76,061
Comparable Store Sales
Borders 5.4% 7.5% 5.2% 8.4%
Waldenbooks (2.5%) (1.8%) (1.7%) (0.4%)
Sales and Earnings Summary (As Percentage of Total Sales)
Quarter Ended Year-to-Date
July 26, July 27, July 26, July 27,
1998 1997 1998 1997
Borders 62.2 % 57.9 % 61.8 % 57.4 %
Waldenbooks 34.1 41.6 34.6 42.1
Other 3.7 0.5 3.6 0.5
Total sales 100.0 100.0 100.0 100.0
Cost of goods
sold, incl
occupancy 74.4 75.3 74.4 75.5
Gross margin 25.6 24.7 25.6 24.5
Selling, general
& admin. expenses 23.9 23.8 23.9 23.8
Pre-opening expense 0.1 0.3 0.1 0.2
Goodwill
amortization 0.1 0.0 0.1 0.1
Operating Income 1.4 0.5 1.5 0.4
Interest expense 0.7 0.3 0.6 0.3
Income before
taxes 0.7 0.2 0.9 0.2
Income taxes 0.3 0.1 0.3 0.1
Net income 0.4 % 0.1 % 0.6 % 0.1 %
Condensed Consolidated Balance Sheet
July 26, July 27,
1998 1997
Assets
Cash and cash equivalents $44.8 $56.8
Inventory 888.8 719.4
Other current assets 54.9 50.5
Property and equipment, net 418.1 307.0
Other assets and deferred
charges 32.7 36.5
Goodwill, net of accumulated
amortization 107.5 43.9
$1,546.8 $1,214.1
Liabilities and Stockholders' Equity
Short term debt $291.5 $112.0
Accounts payable 382.8 326.7
Other current liabilities 170.6 183.5
Long-term debt and capital
lease obligations 5.1 5.5
Other long-term liabilities 52.9 37.4
Total liabilities 902.9 665.1
Total stockholders' equity 643.9 549.0
$1,546.8 $1,214.1
Borders Comparable Store Sales
Year to
Q1 Q2 Date
As Reported:
1998 4.5% 5.4% 5.2%
1997 9.5% 7.5% 8.4%
2 Year Comp: 14.0% 12.9% 13.6%
Excluding Expansions/Relocations:
1998 4.5% 5.4% 5.2%
1997 9.5% 7.5% 8.4%
2 Year Comp: 14.0% 12.9% 13.6%
Normalized Comp*:
1998 5.2% 6.0% 5.9%
1997 9.7% 7.8% 8.7%
2 Year Comp: 14.9% 13.8% 14.6%
* Normalized Comp. Excludes expansions, relocations, and cannibalization.
Store Activity Summary
Quarter Ended Quarter Ended Year to Date
July 26, 1998 July 27, 1997 July 26, 1998
Borders Superstores
Beginning number
of stores 206 163 203
Openings 7 8 10
Ending number of stores 213 171 213
Ending square footage
(in millions) 5.8 4.7 5.8
Walden Mall Bookstores
Beginning number of stores 903 930 923
Openings 1 4 5
Closings (5) (5) (29)
Ending number of stores 899 929 899
Ending square footage
(in millions) 3.5 3.5 3.5
SOURCE Borders Group, Inc.
/CONTACT: Ken Scheve, Senior Vice President and CFO of Borders Group,
734-477-4214/
/Company News On-Call: prnewswire.com or fax, 800-758-5804,
ext. 106169/
/Web site: bordersgroupinc.com
(BGP) |
