Borders Group Inc. said Friday that sales from new stores and efforts to manage the company more efficiently allowed the company to increase its net income in the fourth quarter and for the year.
The new stores and management effort helped overcome a decline in sales in existing Borders and Waldenbooks stores.
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“Traffic was down; less people come into our stores,” Borders CEO Greg Josefowicz said. “However, those who did come to us generally spent more time and more money.”
Sales at Borders stores open at least a year declined 1.2 percent from the previous year, while sales at Waldenbooks stores open at least a year declined 3.2 percent. Same-store sales are considered the best way to measure a retailer’s health.
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For the fiscal year ending Jan. 31, Borders reported net income of $117 million or $1.43 a share on revenue of $3.5 billion. In 2002, Borders reported income of $109.3 million or $1.32 on revenue of $3.4 billion. Earnings per share rose a disproportionate amount because the company repurchased $75 million worth of common stock last year.
For the fourth quarter, Borders reported net income of $111.5 million or $1.39 a share on $759.1 million in sales. That compares with income of $111.7 million or $1.35 on $741.8 million in sales for the same period the year before.
Borders’ stock price has declined steadily since November, from $19.79 a share to $13.85 at the market close Friday.
That drop is due to depressed overall retail sales, a decline in book sales and an announcement that Borders made in February warning investors that same-store sales declined for the year, said Dereck Leckow, a research analyst for Barrington Research Associates Inc.
Leckow views Borders’ problems as short-term economic issues that will be resolved in time.
“I think what we are going to find in the long run is that they are putting the right infrastructure in place to ensure the long-term growth for investors,” Leckow said.
Last year the company opened 41 Borders stores in the United States and eight overseas. Borders has a similar development schedule this year with plans to open 35-40 Borders stores in the United States and eight overseas.
Borders said it was disappointed with the performance of its international division last year. Net income from international stores fell from $3.9 million to $3.5 million.
The company has made some management changes and has added staff to its overseas division, Josefowicz said. Borders also has adjusted its strategic plan for the division. It now expects slower sales growth and is going to try to improve gross margins and reduce costs.
Borders’ international division is only a few years old and never has made money because store openings and other startup costs have hurt profits. This year, however, Josefowicz said, the company hopes to at least break even overseas.
In the United States, Borders has slimmed the size of its Borders stores from an average of 26,000 square feet to 22,000 square feet. In smaller markets, Borders stores are about 18,000 square feet. In the smaller stores, Borders devotes less space to music, Josefowicz said.
Borders also is reducing the size of its music department in other stores, Josefowicz said. That’s because music sales for all retailers declined about 10 percent last year and because Borders wants to devote more space to DVDs.