It was a year of balancing priorities for Borders Group in 2005, as we made the strategic decision to increase capital investments to strengthen the foundation of our business and to fund new growth opportunities. As we stepped up these investments — which carried a physical cost and created a temporary disruption in our business — we also encountered a challenging period in our industry and in segments of the global retail environment.
As a result, Borders Group fell short of what we planned to achieve as consolidated sales improved modestly, growing 3.9% to $4.0 billion, while earnings per share declined by 16.0% to $1.42. Yet, what these numbers don't illustrate is that 2005, with all its investments and challenges, also provided critical confidence that we have the right strategy in place for long-term growth. Let me explain why.
As I said, we faced some headwinds in 2005. For starters, it was a lackluster year for books, as bookstore sales industry-wide decreased by 1.0% according to U.S. Census Bureau estimates. The music industry also continued its steep decline, and our company was significantly impacted by a difficult retail environment in the U.K., where we generate approximately three-quarters of our International segment sales.
While managing these challenges, we were also investing for the future, creating short-term hurdles of our own. In addition to building new stores, both domestically and internationally, we remodeled existing stores to improve their productivity. We refined marketing and promotional programs to increase traffic and enhanced customer service to convert more of those visits into sales.
The downside: Combined, these internal and external factors put significant pressure on our first three quarters of performance, as we recorded a loss of $0.25 per share for the period compared to earnings of $0.12 per share in 2004. The upside: We learned where capital is best deployed to drive long-term results, and in the fourth quarter, we began to see the benefits of investments made in Borders. Highlights for the fourth quarter included:
- Consolidated sales rose 6.3% to $1.5 billion.
- Consolidated earnings per share increased 9.9% to $1.78.