Rivals squeeze booksellers
A sluggish book market and intense competition from rivals such as Amazon.com and Costco Wholesale Corp. are forcing the nation’s top two booksellers -- Barnes & Noble Inc. and Borders Group Inc. -- to rewrite the rules on the book business. Their challenges were revealed as both merchants reported disappointing fourth-quarter results Thursday.
Borders, which reported a loss in the quarter, said it planned to reduce the number of its Waldenbooks stores by half to about 300 by the end of next year and was considering the sale of most of its international businesses. The Ann Arbor, Mich.-based company said it would focus more on its domestic Borders superstore business and better tailor those stores to local markets.
It will develop a consolidated Borders.com e-commerce website, ending its 6-year-old partnership with Amazon.com, and plans to publish exclusive books by celebrities, first-time authors and others under the Borders name. “We need to reinvent our business to exploit the rapid changes taking place in how consumers access information and entertainment,” said George Jones, Borders’ chief executive.
Borders is working on a new concept store prototype that will be refined this year and is expected to be unveiled in early 2008.
New York-based Barnes & Noble, which eked out a small profit increase in the fourth quarter, has focused on further sweetening its deals to its best customers. It already operates an e-commerce site and has developed a publishing business through its acquisition of Sterling Publishing.
In a conference call with investors Thursday, Barnes & Noble CEO Steve Riggio emphasized that it needed to offer customers better deals -- even if it hurts profits in the short term -- saying that industry growth was slower than in the past and competition was fiercer.
“We’re just trying to increase what we have by making it easier for people to shop both online and in the stores. And, you know, giving them a better deal,” he said.
Competition from retail discounters such as Wal-Mart Stores Inc., which can afford to slash prices on books, has squeezed profits at Barnes & Noble and Borders, which have responded with their own discounts.
Barnes & Noble reported a fourth-quarter profit of nearly $127 million, or $1.84 a share, compared with profit of $123 million, or $1.76, a year earlier. It also forecast a loss in the first quarter. Sales reached $1.88 billion, up from $1.75 billion in the year-earlier period.
Borders reported a fourth-quarter loss of $73.6 million, or $1.25 a share, for the three months that ended Feb. 3 compared with a profit of $119.1 million, or $1.78, a year earlier. Revenue edged up to $1.52 billion from $1.48 billion a year earlier.
Barnes & Noble’s shares fell $1.10 to $37.90. Borders dropped 73 cents to $20.70.
