Borders on the Block; Strategic Review in Place
Borders has enlisted JPMorgan and Merrill Lynch as the company's
financial advisors to assist in exploring strategic alternatives, which
may or may not include the sale and/or certain divisions. Borders also
suspended its quarterly dividend and will borrow $42.5 million from
Pershing Square, its largest shareholder. Borders Chief Executive
George Jones noted in the press release that "this will be a
challenging year for retailers due to continued uncertainty in the
economic environment," and that "the current credit environment has
made many of these alternatives prohibitively expensive or entirely
unavailable," he is still pleased "to have the confidence and backing
of our largest shareholder, Pershing Square, which has agreed to
provide funding that gives us adequate opportunity to implement our
plans this year and pursue a range of longer term solutions through the
strategic alternatives review process."
Jones added that the company was on track to reach its 2009 financial
targets, but it would be slowed by the worsening economic conditions.
"We will be slowed in our progress and expect that we'll reach them
later than originally anticipated," he said.
"Still, we believe that our strategic plan remains the right path
toward achieving these goals," he said. This plan includes the
imminent launching of the company's website on its own, the spread of
"new concept" stores that emphasize digital offerings, the display of
more titles face out and a related reduction in inventory of 5%-10%,
among other initiatives.
The news arose out of Borders' report of fourth
quarter earnings for the period ending February 2, 2008. Total
consolidated sales rose 2.8% to $1.3 billion. Net income was $64.7
million compared to a net loss of $73.6 million in the previous year's
fourth quarter, while operating income was $84.7 million compared to
$87.7 million for the previous fourth quarter. Full year sales rose
4.2% to $3.8 billion while the net loss was $157.4 million compared to a
net loss of $151.3 million for the previous year. There was a $125.7 million
charge this year from the sale of Borders's U.K. and Ireland stores.
Fourth quarter sales at U.S. Borders superstores rose 5.1% to
$957.8 million and sales at Borders stores open at least a year rose
2.1%, the third consecutive quarter of same-store sales gains. Books
sales rose 3.2% on a same-store basis but music fell 14.2%. Cafe and
gifts and stationery were up 13.3% and 10%, respectively.
For the full year, Borders superstore sales rose 5.3% to $2.8 billion.
Same-store sales for the year were up 1.5%.
Release
B&N Announces Fourth Quarter Results, Increased Dividend
While Borders is suspending its dividend, Barnes & Noble ha
authorized an increase to its quarterly cash dividend from $0.15 to
$0.25 per share, commencing with the dividend to be paid in June 2008.
In addition, Barnes & Noble's fourth quarter statement confirms
previously reported preliminary results and adds a guidance note for
2008 in advance of its first quarter earnings report on May 22.
B&N expects first quarter comparable store sales at Barnes &
Noble stores to be slightly negative, and as previously announced,
full-year comparable store sales are expected to be slightly positive.
Barnes & Noble, Inc.'s first quarter earnings is expected to range
from $0.05 to $0.10 per share. As previously announced, Barnes &
Noble, Inc.'s full-year earnings per share are expected to range from
$1.70 to $1.90, approximately flat with 2007 on an operating basis.
Non-operating items in 2007 results include the two settlements,
previously noted, as well as the $8 million tax benefit recorded in the
company's second quarter. The share count used in the computation of
earnings per share is based on a diluted weighted average share count of
63.4 million shares for the first quarter, and a diluted weighted
average share count of 64.2 million shares for the full year.
RTT News
Riggio Stock Watch
B&N Chairman Len Riggio bought another 320,000 shares of company
stock on Monday and Tuesday, upping his total to 15.3 million shares or
approximately 25% of company stock oustanding. The latest purchases
came via B&N College Booksellers.
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