On March 22, Borders Group (NYSE:BGP) released fourth-quarter earnings for the period ended Feb. 3.

  • Sales increased by 3%, thanks to a 2.3% increase in sales at domestic Borders superstores. Comparable-store sales in the segment decreased by 2.8%.

  • Gross margins declined 300 basis points, because of increased promotional discounts, de-leveraging of fixed occupancy costs, and non-operating charges.

  • By 2009, the company expects consolidated EBIT margins of 5% to 6%, compared to 1.8% currently, driven primarily by sustained same-store sales growth.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales

$1,519.0

$1,475.0

3%

Net Profit

($73.6)

$119.1

N/A

EPS

($1.22)

$1.78

N/A

Diluted Shares

60.4

67.0

(9.9%)



Get back to basics with the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin

30.1%

33.1%

(3.0)

Operating Margin

(2.1%)

13.1%

(15.2)

Net Margin

(4.8%)

8.1%

(12.9)

*Expressed in percentage points.

Margins are the earnings engine

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$120.4

$81.6

47.5%

Inventory

$1,452.0

$1,405.9

3.3%



Liabilities

Q4 2006

Q4 2005

Change

Accounts Payable

$631.4

$660.3

(4.4%)

Long-Term Debt

$547.8

$212.5

157.8%



The balance sheet reflects the company's health.

Cash Flow Highlights

YTD 2006

YTD 2005

Change

Cash From Ops.

$47.7

$169.9

(71.9%)

Capital Expenditures

$204.2

$196.3

4%

Free Cash Flow

($156.5)

($26.4)

N/A



Free cash flow is a Fool's best friend.

Related Foolishness:

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