Borders plans to 'aggressively pursue lease buyouts' as losses continue
Borders Group Inc. this morning reported a net loss of $64.1 million in the fiscal quarter ended May 1 -- a reminder that the Ann Arbor-based book store chain faces structural problems in an ultra-competitive industry.
With continuing sales problems, Borders plans to "aggressively pursue lease buyouts" at its underperforming stores, chief financial officer Mark Bierley told analysts in a conference call this morning.
Bierley didn't offer specifics about how many of Borders' 686 stores, including about 500 super stores, the company plans to eliminate. But experts have said the company's extensive real estate footprint is one of its biggest problems.
The company's first-quarter loss was down from $86.0 million in the first quarter in 2009. Same-store sales at Borders' super stores in the U.S. dipped 11.4 percent from the same period a year earlier. Total revenue dropped from $650.2 million to $547.2 million.
"Our top line remained challenged during the first quarter, yet we were able to soften the impact on our bottom line through continued cost controls,” Borders interim CEO Mike Edwards said in a statement.
Borders spokeswoman Mary Davis said in an e-mail after the meeting that the chain doesn't expect to seek lease buyouts at "a large number of stores."
"With the overall goal of strengthening our store network, we will continue to work proactively with landlords to renegotiate terms of leases of underperforming stores where we can," she said. "In instances where we cannot do that, we will consider closing those stores again with the overall goal of strengthening the network."
The earnings report comes about a week after Borders announced that it had received a $25 million investment from tobacco executive and private investor Bennett S. LeBow, who was subsequently appointed chairman of the company.
LeBow, through a spokesman, declined an interview request last week. It's unclear whether Borders will discuss LeBow's vision for the company today.
Edwards told analysts this morning that Borders is "extremely pleased" to have the investment because it gives the company the opportunity to improve its balance sheet and continue reconfiguring its brand.
Borders is also hoping that its introduction of the Kobo eReader device, which it is selling for $149.99, and the new Borders eBook store designed by Toronto-based Kobo will give the company an edge in the hyper-competitive digital books segment.
Edwards said Borders believes that consumers will prefer e-reader devices "under the $200 price point" during the fourth quarter, which includes the critical holiday sales season. He said he's pleased with pre-orders for the device.
Meanwhile, Borders plans to announce next week that it will sell a second e-reader at its stores, part of a plan to sell up to 10 devices.
The company is also reworking Borders Rewards, a customer loyalty program that sends coupons directly to its 30 million members. Edwards said the company will launch the new program within months.
Edwards said Borders is seeking to offer more "meaningful local events" at its stores and to communicate more effectively with customers through social media.
Shares of Borders' stock (NYSE: BGP) slipped 4.8 percent to $2.18 after an hour of trading today.
The book store chain employs about 650 workers at its headquarters on Ann Arbor's Phoenix Drive and about 25,000 worldwide.