Investors Like Books-A-Million's Predictable Earnings Story

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booksBrick-and-mortar bookselling has faced more pressure and scrutiny in 2010 than in nearly any other year. Top dog Barnes & Noble (BKS) is for sale and in the midst of a bitter proxy fight, while No. 2 retailer Borders (BGP) continues to look for salvation in the form of revolving door CEOs and seemingly never-ending layoffs.

But the third-largest bookstore chain, Books-A-Million (BAMM) quietly rumbles along at a relatively stable pace, evident in its most recent quarterly earnings, which were released Thursday afternoon. The chain's numbers aren't spectacular -- sales declined, as it did the previous quarter -- but its earnings were up at a time when its competitors can't say the same.

"Solid Results"

For the second quarter ending July 31, net sales were $120 million, a 2.4% decrease from a year ago, while comparable store sales dropped 3.2% versus the same quarter last year. Net income, however increased to $1.9 million, compared with $1.5 million a year ago. The fiscal year to date had the same pattern of net sales drop (1.5% to $237 million) and net income increase (up 8% to $3.9 million) as well.

President and CEO Clyde Anderson said in a statement that the company "did a good job to deliver solid results in a tough environment" and was pleased with their earnings "despite the tough comparisons to last year in the core book business during the quarter."

The "solid results" came despite not having a big hit like last year, when Stephenie Meyer's Twilight novels and books by Glenn Beck and Mark Levin added hefty sums to their bottom line, but as Publishers Lunch pointed out, Books-A-Million has a tendency to rely on similar excuse tropes year after year. In 2009, the company claimed difficulty in relation to Meyer's 2008 book Breaking Dawn, while in 2008, they complained there was no big hit like J.K. Rowling's final Harry Potter novel.

Attractive Stability

But investors still like Books-A-Million for its "rock solid" margins, as Seeking Alpha's Jae Jun explained, and because of the way the company has stayed stable over the last few years when the book industry's waters have been anything but calm.

What remains to be seen is whether the company's investment in frozen yogurt chain Yogurt Mountain last April will prove more boon than bust -- and whether the next quarter will deliver the kind of Meyer or Rowling-like monster hit they are clearly hoping for.
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