First-quarter earnings released after the bell yesterday from Borders Group
As was the case at Barnes & Noble, sales of political and war-related books were brisk, and along with rising sales of music and DVDs, pushed Borders' comps 4.3% higher. Same-store sales were even better at Waldenbooks, beating management's already optimistic expectations by rising 5.6%. The mall-based chain wrung out a $2.9 million profit, versus just $500,000 the year before, on essentially flat sales of $150.8 million.
The strongest performance, however, was generated in international operations. Sales rose 29% (12% excluding favorable currency fluctuations) to $102.7 million, and net losses narrowed by nearly 25% to $3.2 million.
Aside from the year-over-year comparisons, which were aided by last year's war-challenged first quarter, Borders also saw a number of other positive developments. Gross margins improved by 20 basis points, SG&A expenses fell to 24.5% from 25.7%, a $50.1 million stock buyback was completed, and the company's first-ever dividend was paid in January.
Given the maturity of the domestic bookstore industry, Borders' success in the international market represents a distinct competitive advantage over its peers. Full-year guidance was recently reiterated for a 20% rise in international sales, helping to fuel a forecasted 15% jump in consolidated net income to $1.75 per share. If the company can continue to expand into this arena, trim expenses, and keep a close eye on underperforming stores, the next few earnings releases should be real page-turners.
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Fool contributor Nathan Slaughter owns none of the shares mentioned.