It's not that our customers are spending less when they shop. In fact, the average
per-visit purchase at our Borders stores increased nearly 2% in 2002. But total
store visits were down during the year, due in part to fewer blockbuster book
titles to help drive traffic. While these popularity cycles impact our
business, there's a lot we've learned about how to manage them.
To help counteract last year's soft market conditions, we continued to rein in
costs, reducing our expense ratio for the eighth consecutive quarter. We improved
inventory management for the second straight year, keeping our investment in
inventory essentially flat, while increasing our total square footage by 6.7%.
We ended 2002 in a net-cash position, and favorably restructured our
outstanding loan agreements during the year.
As a result, our financial position remains solid, and we continue to make strategic
investments to improve our sales and earnings, staying focused on the four-point
business plan that we initiated two years ago:
1. Building Our Core Business
Investing in stores remains an important part of building our core business.
During 2002, we opened 41 new domestic Borders locations, from Wilton, Connecticut,
to San Diego, California, bringing our total at fiscal year-end to 404.
Our expansion included 10 new "small market" stores, designed primarily for
communities that aren't large enough to support our full-size superstore format.
These new stores — which average about 17,000 square feet compared to approximately
23,000 square feet for a typical Borders superstore opened in 2002 — exceeded our
initial sales expectations, and we will continue to explore opportunities for this
format.
Print Letter to Shareholders (PDF)
