Boring Portfolio

Borders Reports
Wednesday, May 13, 1998
By Greg Markus (

Jacksonville, Fla. (May 13, 1998) -- The Boring Portfolio advanced 0.34% Wednesday, modestly topping gains of 0.28% and 0.32% for the S&P 500 and Nasdaq, respectively. Boring winners outnumbered losers five to two.

This morning, Borders Group (NYSE: BGP) reported results for its first fiscal quarter. As pre-announced last week, the company earned $0.05 per share in the seasonally slow quarter on revenues of $545 million, beatings the Street's consensus earnings forecast by a penny. In last year's opening quarter, Borders had break-even earnings on revenues of $464 million.

The results reflect an increase in the number of Borders superstores to 206 as compared with 163 a year ago and a decrease in the number of Waldenbooks stores to 903 from 930 over the same period. Same-store sales rose 4.5% for the Borders superstore operations and declined 0.9% on the Waldenbooks side of the business. Those numbers were toward the low end of the company's business plan, as relatively healthy sales in February and March were followed by a somewhat soft April, according to Borders management. Despite that, consolidated gross margins improved nicely to 25.6%, versus 24.3% a year ago.

A bit of history may help put these financial results into perspective. In 1992, Troy, Michigan-based K-Mart (NYSE: KM) bought the fledgling Borders business, which Tom and Louis Borders began as a single store in Ann Arbor in the early 1970s. Not long thereafter (as one of a string of questionable decisions, but that's another story) K-Mart spun off the Borders business along with the Waldenbooks mall-based bookstore chain as "Borders Group" in 1995.

Since then, Borders Group has pursued a strategy of pruning back the underperforming Waldenbooks stores while using the steady if undramatic cash flow from that business line to rapidly ramp up the highly successful Borders superstores and, more recently, to fund the development of the e-store.

As noted in this column the past few days, launched, sort of, late last week and made its official debut on Monday.

Alas, some technical difficulties prevented me from accessing Borders' follow-up conference call until late today. I'll prepare a summary of the teleconference and post it in our Conference Call section soon.

Shares of Borders Group rose $1/8 to $31 7/8.

Elsewhere in the world of Boring stocks, Pentair (NYSE: PNR) issued a press release from London this morning confirming that it has decided not to pursue the acquisition of VERO Group plc.

Earlier this month, Pentair had offered a price of 170 pence per share (or a bit over $100 million in all) for the British-based electrical enclosure manufacturer, topping an initial bid for VERO from Milwaukee-based Applied Power (NYSE: APW). Applied subsequently upped its offer to 192 pence per share, and with this morning's announcement Pentair bowed out.

"Any further increase in price is not justified by our analysis of VERO's business fundamentals," said Pentair chairman and CEO Winslow Buxton in the press release. "We can better serve the interests of our shareholders by exploring other opportunities that will expand our presence in key enclosure markets and introduce new product technologies."

Pentair stock closed up $3/8 today, to $45 3/4.

As for your Boring recapper, after a quick meal on Jacksonville's glorious riverfront, it's back to the taped replay of the Borders conference call.


FoolWatch -- It's what's going on at the Fool today.

Stock  Change    Bid 
 ANDW  +  3/4   22.56 
 CGO   +  1/2   36.50 
 BGP   +  1/8   31.88 
 CSL   -  3/8   51.19 
 CSCO  -  3/8   76.00 
 FCH   +  3/16  35.31 
 PNR   +  3/8   45.75 
                   Day   Month    Year  History 
         BORING   +0.34%   0.84%   4.05%  30.92% 
         S&P:     +0.28%   0.64%  15.30%  79.99% 
         NASDAQ:  +0.32%  -0.12%  18.84%  79.27% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     31.88   183.18% 
   6/26/96  150 Cisco Syst    35.93     76.00   111.50% 
   8/13/96  200 Carlisle C    26.32     51.19    94.44% 
    3/5/97  150 Atlas Air     23.06     36.50    58.29% 
   4/14/98  100 Pentair       43.74     45.75     4.59% 
   11/6/97  200 FelCor Sui    37.59     35.31    -6.06% 
   1/21/98  200 Andrew Cor    26.09     22.56   -13.52% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12750.00  $8247.51 
   6/26/96  150 Cisco Syst  5389.99  11400.00  $6010.01 
   8/13/96  200 Carlisle C  5264.99  10237.50  $4972.51 
    3/5/97  150 Atlas Air   3458.74   5475.00  $2016.26 
   4/14/98  100 Pentair     4374.25   4575.00   $200.75 
   11/6/97  200 FelCor Sui  7518.00   7062.50  -$455.50 
   1/21/98  200 Andrew Cor  5218.00   4512.50  -$705.50 
                              CASH   $9447.76 
                             TOTAL  $65460.26