Borders says its fourth-quarter earnings will fall about 10% below expectations, blaming soft holiday sales and lower margins caused by higher promotional spending. The company has also decided to get rid of its All Wound Up toy stores.
 |
|
|||||||||
|
||||||||||
|
||||||||||
By
Borders Group (NYSE: BGP), which operates more than 300 bookstores around the world, warned today that its fourth-quarter earnings will fall short of expectations. After reviewing holiday sales numbers, the company says investors should expect operating earnings to come in about 10% less than consensus estimates of $1.36 to $1.38 a share. The lowered expectations do not include the All Wound Up toy stores, operated by the company's Waldenbooks unit. One of the factors contributing to the shortfall was lower-than-expected sales. Executives say same-store sales for Borders Books and Music stores will rise only about 1% over the same period last year instead of the expected 3%. Comps for Waldenbooks (excluding All Wound Up) should come in around -4% rather than the anticipated -2%. Borders also experienced lower margins during the quarter due to increased promotional spending. The company's international stores fared better, however, matching expectations. In addition, sales through the online site Borders.com are ahead of last year, with an expected increase of about 20%. One bit of today's news investors may like is the decision to cut loose All Wound Up. Acquired in 1999, the toy store chain has failed to live up to expectations. Management changes, a tough toy business -- Consolidated Stores (NYSE: CNS) recently got rid of its KB toy division -- and folding the company into the Waldenbooks structure did not help. A couple of months ago, Borders President and CEO Greg Josefowicz hinted at today's move: "We... will make a full assessment of its value following the fourth quarter." Today, bluntly, Josefowicz said, "All Wound Up will not be a part of Borders Group in 2001." Whether a buyer is found or not, All Wound Up will be wound down in a few months and Borders will take a one-time charge in the process. Josefowicz is making no excuses for his company's holiday performance. "Clearly, while we are confident in the company's future overall, we are not satisfied with our comp store sales figures even considering the challenges all retailers faced this holiday season." Several traditional retailers have recently told the tale of holiday woes and warned of lower-than-expected earnings for the fourth quarter. Nordstrom (NYSE: JWN) joined in with Borders this morning, telling investors it could report numbers 40% to 50% below expectations. Both companies were punished on the news, each down nearly 10% in early trading. Borders competitor Barnes & Noble (NYSE: BKS) also fell about 7% this morning on no news.
RSS Headlines
Fool UK
