Barnes & Noble Inc. and Borders Group Inc., the top U.S. bookstore chains, reported first-quarter profits Tuesday, helped by sales of best sellers such as "The Da Vinci Code" and books chronicling the Bush administration and the war in Iraq.
Net income of $12.5 million, or 17 cents a share, at New York-based Barnes & Noble and $3 million, or 4 cents, at Borders, based in Ann Arbor, Mich., exceeded analysts' estimates. Both retailers reported the biggest sales increase in more than three years.
Shoppers snapped up books touting low-carbohydrate diets along with best sellers such as Richard Clarke's "Against All Enemies," the retailers said. The improved results also stem from comparisons with last year's first quarter, when people stayed home to watch televised coverage of the Iraq war. Sales of Dan Brown's "The Da Vinci Code" more than doubled from a year earlier at both chains.
"That just continues to amaze everybody as to how powerful that book is," Borders chief financial officer Ed Wilhelm said in an interview.
The book retailers said they expect same-store sales to fall this quarter because of comparisons with last year, when customers flooded stores to buy "Harry Potter and the Order of the Phoenix."
Shares of Barnes & Noble rose 43 cents to close at $29.08 on the New York Stock Exchange Tuesday. Shares of Borders, which trails Barnes & Noble in sales, rose 7 cents to $22.70.
Barnes & Noble's net income beat analysts' estimates by 5 cents and compares with a net loss of $2.03 million, or 3 cents, a year earlier. Sales in the period ended May 1 surged 23 percent to $1.45 billion.
Chief executive Stephen Riggio, 49, is trying to gain share from Borders as he offers a customer-loyalty program with 10 percent discounts on purchases. That helped spur sales at Barnes & Noble superstores open at least a year to rise 9.4 percent as customers bought books including Bob Woodward's "Plan of Attack."
Results eclipsed the 12 cents-a-share average estimate of six analysts surveyed by Thomson Financial. Profit this quarter may fall more than analysts' forecasts, the company said.
The company said second-quarter profit will range from 12 cents to 17 cents a share, and sales at Barnes & Noble superstores open at least a year probably will decline.
Analysts expected Barnes & Noble to earn 17 cents this quarter, Thomson Financial said. The retailer earned $13.7 million, or 20 cents, in 2003's second quarter.
Borders' net income compares with a net loss of $4.8 million, or 6 cents, a year earlier. Sales in the three months ended April 25 rose 11 percent to $830.8 million.
Chief executive Greg Josefowicz, 51, has been expanding the retailer's selection of stationery and gifts to boost sales as he reduces space for slower-selling music CDs. Sales at Borders stores open at least a year rose 4.3 percent from the 2003 first quarter.
Borders was expected to earn 2 cents a share by six analysts surveyed by Thomson Financial. The retailer said it expects second-quarter profit of as much as 8 cents a share. Analysts have projected a profit of 6 cents this quarter.