Shares of bookseller Borders Group
In a classic example of taking one step forward and two steps back, prior full-year guidance of $1.70-$1.75, which had been revised upward to $1.72-$1.77 just two months ago, is now being scaled back to between $1.66-$1.73 per share.
At the heart of the problem lies flagging same-store sales performance. As of this week, quarterly comps are tracking 1.9% lower at Borders, and Waldenbooks is running 4.5% behind last year's pace. Management had expected Borders to deliver flat to slightly positive same-store sales gains and a slight negative result for Waldenbooks. The company is now anticipating a low-single-digit fourth-quarter decline for both chains.
Part of the weakness was attributed to the negative impact of hurricanes, as well as lighter than usual store traffic and the upcoming presidential election. The first reason seems legitimate (if overused), but the second is more of an effect than a cause, and the third is simply puzzling.
Blaming the election is tantamount to saying that people have suddenly stopped reading and are delaying purchases until Nov. 3, which seems unlikely. Furthermore, the elevated levels of partisan rhetoric should, if anything, heighten demand for political titles, which have been singled out by both Borders and rival Barnes & Noble
There was some good news today; international sales have topped projections by climbing 27.1%. And coming up a few cents short this quarter is hardly a catastrophe. However, the weak fourth-quarter outlook is disconcerting. As with many companies in the retail world, such as Motley Fool Stock Advisor recommendation Amazon.com
Last year, for example, $1.54 of the company's $1.55 total annual earnings was posted in the fourth quarter. The year before, a grand total of $0.07 was earned in the first three quarters combined. Clearly, now is not a good time for Borders to take its eye off the ball.
Are you a literary-minded Fool? Why not join the Books & Writing discussion board?
Fool contributor Nathan Slaughter is currently rereading his Clive Cussler collection. He owns none of the companies mentioned.