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Posted on Thu, May 27, 2010 : 9:11 a.m.

Borders plans to 'aggressively pursue lease buyouts' as losses continue

By Nathan Bomey

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.


Borders employs about 650 workers at its headquarters in Ann Arbor.

File photo

"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.

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.


Woman in Ypsilanti

Fri, May 28, 2010 : 10:20 a.m.

@A2D2 That is just it. And that is why customer service is so important. Unfortunately, it is a bit out of my way for me to become a real regular customer but bookstores like Nicola's over at Westgate are really good at the customer service thing. There are lots of times when I want a book and drive all the way over there to get it even though going to Borders or Barnes and Noble would be easier/closer.


Fri, May 28, 2010 : 7:27 a.m.

The same problems that have hit mony other retailers has hit Borders: ** A country in recession - libraries are free, so books become a "want to have" not a "need to have". ** New, alternate channels now exist. Amazon, EBay, and other internet sites, plus downloadable music have sucked the life out of many book and music sellers. ** Too many stores chasing too few dollars. Just like many home town hardware stores fell to a changing retail landscape, Borders and BN are facing the fact that there probably is not room for more than one of them in a given town.


Fri, May 28, 2010 : 6:14 a.m.

My nine year old son and I were at Borders yesterday to buy him a book. While he could defintaly get any book at the library, which we have done, he prefers to own some of the books he reads and takes pleasure in building his own personal library. Part of the experience is going to a bookstore where he can look over the titles and preview a book before he buys it. We could probably get a better price online but the experience would be lost and a child likes instant gratification. I hope that brick and mortar bookstore can find a way to survive. That being said, we were one of maybe four customers at Borders and while we didn't need any help finding what we were looking for, we were never greeted by any sales associate or asked if we needed assistance. Very poor customer service.

Woman in Ypsilanti

Thu, May 27, 2010 : 1:12 p.m.

The entire industry is hurting but especially physical bookstores. So even if they were doing everything right, they would be hurting. But Borders is NOT doing everything right. The last time I shopped there was before Christmas. My experience was terrible. The time before that, my experience in the store also was terrible. I was looking for a specific title and couldn't find a staff member to help me find it. The staff don't seem to care too much about customer service and are spread so thin that even if they did, they can't be very helpful. I've talked to the staff at our local stores and based on how they are treated, it isn't surprising to me at all that they don't care too much about the company. I know that the recent lay offs have damaged morale throughout the organization. Staff assistance is one of the major ways they're different from Amazon but they don't seem to cultivate happy employees who in turn, tend to make customer service a higher priority.


Thu, May 27, 2010 : 1 p.m.

I hear you, amarie. But, at the same time, I've been able to get books through Borders that Amazon hasn't had. I prefer going to Borders, in person, even though I frequently walk out with more books than I intended to buy. Borders might need to contract its network, but I hope they don't go away. The one in Arborland is my destination store. After that, I'll see what the rest of the mall has to offer.


Thu, May 27, 2010 : 9:45 a.m.

2010 will be the year that borders dies....