updated 11/16/2004 7:18:52 PM ET 2004-11-17T00:18:52

Borders Group Inc. said Tuesday that it swung to a loss in the fiscal third quarter as fewer customers came to stores and best seller sales declined. The bookseller also predicted sluggish U.S. sales for the fourth quarter and fiscal 2004.

For the three months ended Oct. 24, Borders posted a loss of $1.5 million, or 2 cents per share, compared with a year-ago profit of $500,000, or 1 cent per share. Excluding certain items, the company would have recorded a loss of $1.1 million, or 1 cent per share, wider than the year-ago loss of $100,000, or break-even per share.

Analysts, whose estimates usually exclude one-time or unusual items, predicted a loss of 2 cents per share, according to Thomson First Call.

Third-quarter 2004 revenues totaled $838.6 million, up 2.6 percent from $817.1 million a year earlier. Analysts expected higher revenue for the latest quarter of $845.4 million

Sales at stores open at least a year, or same-store sales, declined 1.6 percent for Borders superstores and 4.1 percent for its Waldenbooks stores during the quarter. The company said the drop in same-store sales came from "sluggish store traffic" and slower sales of best sellers.

"The decline in third quarter same store sales was driven by sluggish store traffic and a slowdown in sales of best sellers," Borders chief executive Greg Josefowicz said in a news release. "As we enter the critical holiday period, we are working hard across all businesses to drive traffic and average ticket."

For the fourth quarter, Borders said it expects earnings of $1.55 to $1.62 per share, including charges of 4 cents to 6 cents per share from adjustments. Analysts predict earnings of $1.60 per share. Borders earned $1.50 per share in 2003. The company said it expects same-store sales for Borders to be flat or decline by low single digits and that Waldenbooks' same-store sales will fall by low single digits.

For the year, Borders forecast earnings of $1.65 to $1.72 per share, including the fourth-quarter charge. International sales should be up 20 percent to 25 percent from 2003, Borders said. Analysts expect fiscal 2004 earnings of $1.71 per share.

For the first nine months of fiscal 2004, Borders earned $10 million, or 13 cents a share, compared with $200,000, or less than 1 cent a share, one year earlier. Revenues for this year's first three quarters totaled $2.53 billion, compared with $2.41 billion in 2003.

Headquartered in Ann Arbor, Borders has more than 1,200 stores worldwide. It is second in sales behind Barnes & Noble Inc.

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