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Borders Group


said its second-quarter profit rose, helped by the latest installment of "Harry Potter," and it raised its full-year earnings forecast.

"We were able to convert strong mid-quarter sales driven largely by 'Harry Potter and the Order of the Phoenix' to bottom line performance," said Borders Group Chief Executive Greg Josefowicz.

In the quarter ended July 27, the company earned $4.5 million, or 6 cents a share, compared with last year's earnings of $3.4 million, or 4 cents a share. This is above the company's own EPS prediction of 1 cent to 3 cents. Results included a net after-tax charge of $1 million, or a penny a share, related to closing costs of Waldenbooks stores and a Borders store relocation, Borders said.

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Excluding items, the company earned $5.5 million, or 7 cents a share, compared with a loss of $1 million, or a penny a share, last year. Analysts' consensus was a profit of 2 cents a share.

Consolidated sales rose 8.3% to $826.9 million. Sales at Borders superstores were $570 million, up 7.6%. Comparable store sales in the Borders unit increased 1.7% aided by strong book sales including the new Harry Potter title. The company's Waldenbooks unit had sales of $168.7 million, up slightly from last year, and comparable store sales in that unit rose 3.7%.

Gross margin fell to 25.5% from 26.3% last year, due to increased bestseller discounts, the company said. The company also opened eight new Borders stores during the quarter.

Ann Arbor, Mich.-based Borders Group said it expects consolidated earnings to range from a loss of 2 cents a share to breakeven for the third quarter. Wall Street consensus is a loss of 2 cents a share.

Due to the better-than-expected second quarter, the company increased its full-year EPS guidance to $1.50 to $1.45. In May, the company had predicted $1.40 to $1.46 a share. Analysts expect $1.43 a share, on average.

Comparable store sales for the full year are seen flat to down slightly at both Borders and Waldenbooks, the company said.

Shares of the company closed at $19.29 Thursday after the close.