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Business Economics: Borders Group Inc. Borders Group Incorporated has a pretty ancient history that starts back in the 1930 s and is actually appearing now to be one of the most successfull corporations in the World. Its current market position appears to be the second place in the industry with constantly growing operations results. The companys productivity grows constantly in parades with the growing demand for books. Because Borders has stores in all fifty states and many stores abroad, their position can be considered as one of the strong.
Also this multinational and multistate's aiming for customers gives them the privilege to vary their prices according to the demand and to the competitors prices. Management is planning for full year 2003 comparable store sales to range from slightly negative to slightly positive for Borders stores and to decline in the low single digits for Waldenbooks. Sales for the International segment are expected to increase in the high teens on a percent basis. (Finley) We expect the challenging sales environment to continue in 2003, particularly in the first half of the year, said Borders Group Chief Executive Officer Greg Josefowicz. It is likely there will be improvement in the second half, with the release of the fifth in the Harry Potter series, and with the potential for enhanced clarity in world and economic issues. Yet, we will manage the business prudently and efficiently throughout the year to continue to generate earnings growth and free cash flow. (Finley) In order to have a certain kind of proof for the assumption that Borders Group is one of very successful organizations we may take a look at their resent financial results that are available for public use. Borders Group achieved consolidated sales of $ 751. 4 million for the first quarter, flat with the prior year.
For the first quarter, the company recorded a net loss of $ 4. 8 million, compared to net income of $ 3. 9 million in 2002. Gross margin as a percent of sales declined in the first quarter to 25. 1 % from 26. 5 % due to a loss of leverage in fixed occupancy costs resulting from comparable store sales declines. Product margins as a percent of sales were flat for the period compared to a year ago. SG&A as a percent of sales increased to 25. 6 % from 25. 2 % in the first quarter as expense controls could not offset the impact of comparable store sales declines. The companys balance sheet remains strong. Inventory productivity was maintained despite the sales weakness as the companys investment in inventory was down slightly from 2002, while consolidated sales for the quarter remained flat and total square footage increased 7. 4 %.
For the fiscal year to date, the company has repurchased stock totaling $ 17. 2 million. (Arbour) Borders Group opened eight new Borders stores in the U. S. during the first quarter, ending the period with 412 total domestic locations. First quarter sales at Borders superstores were $ 521. 5 million, an increase of 0. 6 % over the same period in 2002. Comparable store sales for Borders declined 5. 0 % for the first quarter resulting from reduced customer traffic, which affected all product categories. Stronger performing categories included DVD and Gifts and Stationery.
Net income declined 57. 1 % for the first quarter to $ 4. 8 million. During the first quarter, the company opened three new overseas Borders locations, ending the period with a total of 33 International Borders stores and 36 Books etc. stores in the U. K.
Total International segment sales for the first quarter were $ 79. 6 million - a 25. 9 % increase - which benefited from a weaker U. S. dollar. For the quarter, EBITDA (see Segment Financial Information attached) increased by $ 0. 7 million to $ 0. 3 million. The net loss declined to $ 4. 2 million due to improving gross margin and SG&A ratios. (Arbour) As part of its ongoing strategy to drive shareholder value, the Borders Group Board of Directors has increased the level of authorization for company stock repurchases. Under the revised authorization, the company will have available up to $ 150. 0 million plus proceeds and tax benefits from stock option exercises for the purchase of common stock.
Purchases will be made primarily through open market transactions, subject to market conditions and trading. Management expects improvement in sales trends continuing through the end of the year. For the full year, management expects earnings per share of $ 1. 40 to $ 1. 46, representing growth over the $ 1. 36 earnings per share recorded for 2002. Comparable store sales for the full year are expected to be slightly negative at Borders superstores and decline in the low to mid single digits at Waldenbooks. For the full year, total sales in the International segment are expected to increase by approximately 20 %. (Finley) Within the conceptual frameworks, taking into account the presented facts data and estimated expectations this becomes pretty obvious that here we deal with the big shark of contemporary business. Their marketing strategies as well as good managerial decisions give the company a chance to have even more futher improvement towards big success.
Apparently Borders Group Inc has a pretty good standing and also a very good alliance companion in the face of Amazon. com. Together these two companies form a venture that has very limited amount of things that they depend on and consequently a very high odds of being successful. Bibliography: Ann Arbour, Borders Group Reports Q 1 Results; Board of Directors Authorizes $ 150 Million Stock Repurchase Program; Q 2 and Full Year Outlook In-Line with Analyst Consensus, Business Wire, May 2003.
Joe Finley, Borders Group Inc: the 2003 Perspective, from Wired, July 2003.
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Research essay sample on Business Economics Borders Group Inc
