Borders 2nd-qtr loss narrows, stock jumps 14 percent

LOS ANGELES (Reuters) - Borders Group Inc <BGP.N>, the second-largest U.S. bookseller, posted a narrower-than-expected quarterly loss on Tuesday, helped by tighter inventory and lower costs, sending its shares up nearly 14 percent.

"Right now the book business has been affected by the slowing of the economy, like other things have as well," CEO George Jones said. "However it's still a very strong business."

Larger rival Barnes & Noble Inc <BKS.N> blamed a troubled U.S. economy when it cut its full-year sales forecast last week.

Borders, which put itself up for sale in March, said its second-quarter loss from continuing operations slimmed to $11.3 million, or 19 cents per share, from $18.1 million, or 31 cents per share.

Excluding adjustments, Borders made a loss of 18 cents per share, handily outperforming analysts' average expectations for a loss of 29 cents per share, according to Reuters Estimates.

Total sales from continuing operations fell 7 percent to $749.2 million.

Sales at established Borders domestic superstores dropped nearly 9 percent from a year ago, when the final book in the Harry Potter series was released.

Excluding the impact of Harry Potter, Borders said domestic superstore same-store sales were down about 5 percent.

In the Waldenbooks Specialty Retail segment, comparable-store sales fell 7 percent. Excluding Harry Potter, same-store sales were down 1.4 percent.

Inventory from continuing operations decreased at cost by $181.7 million in the quarter.

Debt, including prior-year debt from discontinued operations, was down 37 percent at $465.7 million at the end of the second quarter.

After suffering from liquidity problems earlier this year, Borders has been controlling costs, including cutting jobs and inventory at its stores.

It cut music inventory by more than 30 percent to deal with decreasing sales of compact discs.

And the Ann Arbor, Michigan-based company expects its online sales, which it re-launched in May and started marketing in July, will do a little better than break even this year.

"We've been really, really pleased with the customers' response to the site," Jones said.

Shares in Borders rose to $6.10 in late electronic trading from a New York Stock Exchange close of $5.36.

(Reporting by Lisa Baertlein and Alex Dobuzinskis; editing by Jeffrey Benkoe and Braden Reddall)