Barnes and Noble 2003 Annual Report Download - page 3

[LETTER TO OUR SHAREHOLDERS ]
2 2003 Annual ReportBarnes & Noble, Inc.
DEAR SHAREHOLDER:
Although the first quarter of fiscal 2003 was one of the worst for the retail sector in decades,
by late spring and summer the impact of the economic recovery became clear. Our business,
too, began to enjoy the benefit of this upturn, as traffic and sales increased as the year
inched forward. Then, buoyed by a string of bestsellers, our sales surged into the last
quarter, with comparable store sales in the fourth quarter up 6.4 percent. For the year,
comparable store sales were up 3.2 percent, a great conclusion to a year that began with
little promise.
Most significantly, consolidated earnings per share (EPS) rose a spectacular 49 percent,
while the company again led the bookselling industry in comparable and total sales,
operating profit and cash flow. The increase in profit for the bookselling segment was due
largely to increases in sales, margins and operating efficiencies.
Within the bookselling segment, we were very pleased with the emergence of “big” books,
several of which had a significant direct impact on sales as well as on store traffic: Hillary
Clinton’s Living History, J.K. Rowling’s Harry Potter and the Order of the Phoenix,
Dr. Arthur Agatston’s The South Beach Diet, and Dan Brown’s The Da Vinci Code were as
impressive an array of blockbusters as we’ve seen in many years. Amazingly, two of these
titles (The Da Vinci Code and The South Beach Diet) continue to sell well into fiscal 2004,
and paperback versions of all of these titles will provide a sales lift in the year ahead.
While we believe that many more blockbusters are in the offing, our own publishing
program has clearly begun to even out some of the bumps in the publishing cycle in terms
of sales and, more importantly, margins. Led by the phenomenally successful launch of
Barnes & Noble Classics, and SparkNotes, our publishing program has a total of over 1,600
titles in print. All sell for much less than comparable publisher titles and deliver much
greater margins. And, while sure-fire backlist titles are our mainstay, our re-issue of Dow
Mossman’s novel, The Stones of Summer, and the amazing Weird N.J. (80,000 copies sold
in New Jersey alone!) demonstrated our ability to place self-published titles at the top of the
bestseller lists. In all, self-published titles have now reached 5 percent of total bookstore
sales, well on the way to our target of 10 percent.
At the same time, our Sterling Publishing division forged ahead, strengthening its lead
within its market niche, adding title after title to its impressive backlist. Aside from
achieving its target in sales, margin and profit, Sterling also delivered promised cost savings,
reducing paper, binding, print and production costs throughout the organization. Equally
important, the relationship between Sterling’s editors and the Barnes & Noble buying office
is beginning to produce an awesome array of titles, many of which will be on the shelves
this fall.