Fool.com: Borders Holiday Sales Look Sharp (Breakfast News) January 11, 2000

BREAKFAST WITH THE FOOL

Tuesday, January 11, 2000

"Originality and the feeling of one's own dignity are achieved only through work and struggle."
-- Dostoevsky

Borders Holiday Sales Look Sharp

By Richard McCaffery (TMF Gibson)

Book seller Borders Group (NYSE: BGP) is having a crisp fourth quarter as holiday sales pushed revenue up 16% to $983 million, compared to $845 million a year ago.

Borders superstore sales for the fourth quarter jumped 20% to $571 million. Better than that, comparable-store sales increased 6.4%.

For the 50 weeks ended January 9, consolidated sales rose 15.8% to $2.8 billion. Superstore sales in this period rose 23% to $1.8 billion, and comparable-store sales increased 5.5%.

Comparable-store sales are an important measure of retail success because they represent sales at stores open at least one year. (Sales at new stores often spike, so throwing them into the mix would skew results.)

Unless something wacky happens in the next two weeks, Borders expects to meet full-year estimates of about $1.17 per share, up from $1.12 a year ago. If this is the case, earnings grew about 4.5% annually, a lot slower than sales. Earnings, however, include expenditures for growth, such as international expansion efforts and the Borders.com initiative, so slower earnings are to be expected. The company will report its full results March 6.

Any shareholder who's read a release such as this knows it has limited use because the numbers aren't put in context. There are two quick ways to do this: Compare the sales increases to last year's increases, and compare them with those of a competitor.

This is a hassle, and companies rarely make it any easier. Few would expect Borders to start talking about Barnes & Noble (NYSE: BKS) in its sales release, and you can't really fault the company for that. Still, I'd like to see it, and a few bold companies do make outright comparisons with competitors. Anyway, investors must make the effort to know where their companies really stand.

Basically, Borders had a strong quarter and a strong year compared to Barnes & Noble. Keep in mind that it may not be a precise apples-to-apples comparison because the time periods are different, and it's hard to know which categories of sales to compare. Let's face it: It's maddening, and the comparisons you can comfortably make are limited. That's why it's smart to focus mainly on percentages. Here's what I boiled it down to.

For the nine weeks ended January 1, comparable-store sales at Barnes & Noble jumped 5.8% (Borders: 6.4% for the quarter). For the 48 weeks ended January 1, superstore sales at Barnes & Noble rose 12.2% (Borders: 23% -- though they are working from a smaller number base).

It gets sticky making exact comparisons, but that's one advantage to buying and holding stocks for at least three years. It gives you a chance to get to know the company and its competitors well enough to get a feel for things.

Borders Q4 sales results should also be put into comparison against last year's figures, which were down due to severe winter storms. This makes it easier for the company to post higher numbers this year, and investors should factor that into their thinking. Warren Gump recently wrote a story that takes you through the details of such comparisons. Click here to read all about it.

News to Go

Satellite television provider Pegasus Communications (Nasdaq: PGTV) and privately held Golden Sky Holdings have reached agreement to merge for about $1 billion in stock and assumed liabilities. The deal bolsters Pegasus' position as a leading provider of multichannel video services.

Holding company Bank One (NYSE: ONE) will take a $725 million pretax charge in the fourth quarter, in part for the write-down of assets at its First USA credit card company.

Communications software maker Kana Communications (Nasdaq: KANA), which went public September 21 at $15 a share, plans to split its stock 2-for-1. Investors will receive the shares after close of business January 28. Kana closed last night at $197.

More Foolishness

The e-commerce transactions have been doubly good for BEA Systems... Learn how to handle the unexpected after retirement... We'll be held accountable for the performance of stocks from 1999's Industry Focus.