The booksellers have been reporting earnings this week, and it seems Borders Group (NYSE:BGP) might face the biggest competitive challenges of them all, considering its quarterly loss widened on a year-over-year basis.
The rather uninspiring third-quarter results from Borders might not have been unexpected, but that doesn't mean the sting is any better. (Here's the breakdown of the quarter in our Fool by Numbers.) There's not much to hitch your wagon to if you're looking for good news: Borders' quarterly loss widened, sales rose but rather anemically, gross margins slipped, SG&A increased, and the company's interest expense rose considerably due to higher debt levels.
In Borders' press announcement, CEO George Jones admitted that while the quarter came in as expected, "we are certainly not satisfied with these kinds of results in the long run." He went on to outline Borders' strategic plan: differentiating its stores from competitors, "right-sizing" its mall stores, by which I'd imagine he means Waldenbooks, "driving profitability" in its international business, and "embracing innovation and technology." While Jones said he is "excited about where we are headed," I can only imagine some Borders shareholders might be wondering where the heck that is, since most of the above strategies are either fairly obvious or rather amorphous in terms of what exactly they might mean.
I covered the earnings releases from both Barnes & Noble (NYSE:BKS) and Books-A-Million (NASDAQ:BAMM) earlier this week, and I can't say I was excited about any of them as potential investments right now. They've got their work cut out competing with one another, as well as a wealth of other options customers can turn to for books and music, like Amazon.com (NASDAQ:AMZN). Books-A-Million provides bargain books and Barnes & Noble is increasing the savings the customers in its loyalty program enjoy, so that makes the short term look even more challenging for Borders. And of course, it's been said before and surely will be said again -- big bookstore chains like these often really rely on blockbuster best-sellers (the Harry Potter books are a grand example) to drum up really impressive growth.
I love books, I really do. And although I usually get my books through Amazon, yes, every once in a blue moon I enjoy browsing through Borders. However, given the competitive challenges (and the fact that the stock's trading at 23 times earnings doesn't sound compelling either, given the reality of recent financial results), I think Borders is yet another stock that should be left on the shelf. For now, anyway.
Looking for some more reading? Curl up with these Foolish articles:
- For the rundown of Borders' third-quarter numbers, turn to our Fool by Numbers.
- Get a read on Books-A-Million's third quarter.
- Here's word on Barnes & Noble's quarterly results as well.
- Catch up with Borders' last quarter, which also wasn't too inspiring.
Amazon.com is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have pointed to as great investments, click here for a 30-day free trial.
Alyce Lomax does not own shares of any of the companies mentioned. The Fool's disclosure policy stars a young boy wizard.
