Borders 'just trying to stay alive,' analyst says
The holiday shopping season may determine whether financiers are willing to help Borders Group Inc. get the credit it needs to survive without turning to court-based restructuring, a retail industry analyst told Reuters.
With just over a week until Christmas, Borders needs every shopper it can find. The Ann Arbor-based book store chain said last week that it may face liquidity problems in the first quarter of 2011, a crisis that could threaten its ability to conduct its day-to-day business.
"They're just trying to stay alive at this point," Standard & Poor's analyst Michael Souers told Reuters. "Hopefully, their numbers can improve enough to get someone to want to lend them more money."
One of Borders' top shareholders, New York hedge fund manager Bill Ackman's Pershing Square Capital Management, has said he's willing to help Borders finance an acquisition of rival Barnes & Noble in an effort to consolidate costs and achieve profitability.
Borders employs about 600 people at its Ann Arbor headquarters.
But another analyst suggested that solution doesn't make sense because Barnes & Noble could swoop in and snatch the most valuable remains of Borders if the Ann Arbor company has to file for bankruptcy.
"If one wanted to go after the other's real estate, they could just wait until bankruptcy and pick them off on the cheap," Morningstar analyst Pete Wahlstrom told Reuters.
Borders employs about 600 workers at its Ann Arbor headquarters and more than 19,000 at about 600 stores.
Reporting its third-quarter sales last week, the firm recorded a third-quarter net loss of $74.4 million, doubling its loss from the same period in 2009. Borders said that its revenue declined 17.6 percent to $470.9 million and that sales at stores open at least a year dropped 12.6 percent, reflecting a continuous revenue slide.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
UofM_Fan
Thu, Dec 23, 2010 : 1:32 p.m.
I used to be one of the long-term employees at Borders. I remember the days that I used to love working for them. But over the years I grew sicker and sicker of the corruption within and abuses of management and left. I was tired of hearing jargon like, "We have to do more with less." and "We have to work 'smarter' and not 'harder'". I was tired of being told that times were tough and they couldn't afford raises, while those at the top continued to pull in millions each year. Borders is a perfect example of what happens when greed and corruption are the motivators of the people at the top. They come in, make a truck-load of money and bail out. Now there are thousands that have lost their jobs because of it. Trying to stay alive? They can't. All it is doing is prolonging the inevitable. Borders is doomed. It is destined to fail. The plague of corruption and greed went on for far too long.
MiSola
Sat, Dec 18, 2010 : 9 a.m.
I could sit at home buying everything I want on the internet. That is, if all I want to do is sit home and interact with the internet. I still prefer to walk down the streets of our town, stop into Borders and be with others who love doing the same. If we close all the stores in town with our absence and pulling our money out, what kind of town will we have?
melissa
Fri, Dec 17, 2010 : 10:11 p.m.
Unemployment has caused me to find cheaper means. I never buy new books anymore - if there's something I want to read I get it from the library, and if there's something I want to own I usually use swap sites now like goodreads.com and swap.com and paperbackswap.com
Mike H.
Fri, Dec 17, 2010 : 8:36 p.m.
Maybe it's just the holiday season or all the coupons Borders is constantly putting out, but I went to Borders today and it was packed with people. There was a huge line at the checkout and people all over the store. You wouldn't know just from looking at it that this company is on the verge of non-existence.
runbum03
Fri, Dec 17, 2010 : 6:39 p.m.
In this day and age when even the Salvation Army can't meet its goals (1/3 down in Grand Rapids), many bookstores are being forced to weather the same economic storm. Some won't make it. In the last two years I've gone down from purchasing a book a week to flinching a peep or two. Yes, regrettably, I've cut back a bit in my purchases. I have a list, however, of over fifty titles I would like to buy. The good news is that the gap of the missing bookstores might be filled later by the indies. I'm seeing a few new stores pop up here and there. Doesn't everyone dream about owing a bookstore?
CynicA2
Fri, Dec 17, 2010 : 6:12 p.m.
... I think I'll wait 'til all the calenders are about 60 or 70 % off after Christmas. That's about all I ever buy there anymore.
sbbuilder
Fri, Dec 17, 2010 : 6:07 p.m.
I was just in Best Buy earlier today, and was discussing the incredible pace of technology with one of the Geek Squad. We had fun coming up with different ideas of what would be available in just the next four years. We agreed that technology is highly unpredictable in specifics, yet highly predictable in its nature. What's that got to do with Borders? I think the e-book revolution will drive the mega bookstores out of business eventually, and the weaker ones very quickly. Just look at how NetFlicks has decimated the brick and mortar video industry. And now, it looks like streaming will replace actual DVD's. All this from a passionate book lover. We'll probably have books for the next century or so, but they will become an increasing rarity. The first couple hundred books in my library came from the original store on State Street. What a great place to shop. It will be sad to see them go, but go they will.
Mike H.
Fri, Dec 17, 2010 : 2:54 p.m.
Nothing can replace the experience of a bookstore, but... I own both an Amazon Kindle and B&N Nook. I do all my book shopping/reading wherever I want to now. At least B&N has incorporated some features of the in-store experience with the Nook, like discounts/freebies and full access to their digital books while connected to their in-store network. Borders is too late to the game on this one... I just don't have a reason to ever walk into a Borders anymore.
JimB
Fri, Dec 17, 2010 : 11:58 a.m.
I will not go out of my way to shop at Borders any more since last summer due to poor customer service. No follow up from anyone via email or phone call with an online order issue I had that lasted a few months. My inbox is flooded with 'discounts/coupons' to fish for more sales but they don't back it up with service. Why spend money with a company who's customer service is less and less as time goes on. Looks like a spiral to me.
PittsfieldTwp
Fri, Dec 17, 2010 : 11:24 a.m.
I can't speak for the rest of the nation, but AA district library is just too good, even with new releases. My wife is part of a bookclub and she has been able to get most everything from the library.
Woman in Ypsilanti
Fri, Dec 17, 2010 : 11:09 a.m.
After Borders began treating their employees poorly, the in-store experience was no longer worth paying extra for. I shopped there last Christmas just to give them one more chance and havent been back since. I prefer the service of smaller independent book stores.
a2idealist
Fri, Dec 17, 2010 : 11:08 a.m.
Great link, dotdash. Thanks for posting. I've shopped at Borders plenty this season. I shop at Nicola's Books and Tree Town Toys first for my kids, but Borders is my next top choice for gifts. You could get the same stuff at Target, or you could go to Borders and help keep a local business afloat. Best finds at Borders this year? A perfect recipe book/organizer for just $12 (found upstairs at the downtown location) and discovering all of the wind-up toys at just 99 cents each! (Usually $3.99-$7.99).
Kim
Fri, Dec 17, 2010 : 10:52 a.m.
I was a faithful Borders/Waldenbook customer. I don't shop there now because my nearest Borders is 45 miles away. I now shop Barnes & Noble because it's right here in town. Borders made a big mistake when they all those stores. People don't have the money to drive forever and then buy books too in this economy. I wish them luck, but they really did it to themselves.
dotdash
Fri, Dec 17, 2010 : 10:38 a.m.
Local employees, local corporation = supporting the home team. For the trifecta, buy local authors. Try these: http://www.aabookfestival.org/HTML/authors_2010_page1.htm Browsing in a bookstore is one of the small pleasures in life -- there's no parallel online -- so shopping for books can be a gift to yourself as well.