This is more about business than literature, but it will affect the way a lot of us buy our books: Borders may put itself up for sale soon. (Associated Press report below; Publishers Weekly carries the Borders press release here.)
"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Borders CEO George Jones says. "Looking forward to 2008 and beyond, the company determined that additional capital was required."
I suppose somewhere, a former book clerk left unemployed a decade ago when her independent store was run out of town by a big chain is smiling that the same pressures are now hitting one of the biggest of the big boxes. But you'll see no schadenfreude here. My own neighborhood was lessened by the departure of a Borders not long ago, and I take no delight in the thought that the eventual effect of this Wall Street maneuver is that other neighborhoods will probably be facing the same.
You can argue that we in Dallas would be better-served with a powerhouse locally owned bookstore chain. But that era has passed around here. In the gap, the local Borders operation has helped attract high-quality authors to town for signings. (The local marketing director is a friend of this blog and has helped contribute local best-seller lists for the print edition.) They aren't alone in their efforts, of course. But let's hope that sort of local commitment can continue, whatever turmoil lies ahead.
DETROIT (AP) -- Borders, the nation's second-largest bookseller, said Thursday it may put itself up for sale and that it has lined up $42.5 million in financing to help the chain continue operations.
Shares tumbled more than 29 percent, or $2.07, to $5.03 in volatile trading at midday.
Borders has lost market share both to online retailers and to discounters like Wal-Mart Stores Inc. and its possible sale was given mixed prospects by industry analysts.
The operations financing announced Thursday comes from hedge fund Pershing Square Capital Management LP, its largest shareholder, and includes an offer to buy Borders' international businesses.
"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Borders CEO George Jones told The Associated Press. "Looking forward to 2008 and beyond, the company determined that additional capital was required."
Borders Group Inc. said it is reviewing a wide range of possibilities, including the sale of only part of the company or certain divisions.
"In the economic environment, we believe we're on the right track and our plan is the right one to get us there," Jones told analysts in a conference call. "Now we have the flexibility necessary to get us where we need to be."
Earlier, in a statement, Jones said: "liquidity issues may otherwise have arisen in the next few months" without the funding commitment.
Credit Suisse analyst Gary Balter, however, noted that the loan from Pershing Square comes at a high 12.5 percent interest rate. And he said the agreement could make Borders a less attractive buyout target.
"We see little opportunity in the near term for Borders to be sold, with the number one candidate Barnes & Noble not likely to pursue a deal at this price," Balter wrote in a note to investors.
Barnes & Noble Inc., the nation's largest bookseller, on Thursday said fourth-quarter profits declined 9 percent.
Barnes & Noble told investors during a conference call that it has not been approached by Borders' investment bankers but if it were, it would take a look at its rival.
The pressure on booksales has been felt broadly. Just Tuesday, Bertelsmann AG reported a sharp decline in 2007 profit and said it was considering all options for its struggling Direct Group, which operates book, music and DVD clubs.
If there is a plus side, Goldman Sachs analyst Matthew J. Fassler said in a note that Borders' "financial distress diminishes the impact of antitrust considerations."
But he also pointed out that Barnes & Noble competes in many of the same neighborhoods as Borders, and it would be hesitant to pick up locations that overlap.
In fourth-quarter earnings results that were delayed for one day, Borders reported net income of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.22, during the same period last year.
Revenue fell 2 percent to $1.35 billion, from $1.37 billion, for the fiscal quarter ended Feb. 2.
Analysts polled by Thomson Financial expected profits of $1.42 per share on sales of $1.37 billion.
Quarterly results included a $7 million loss from the sale of Irish and British businesses for $13 million.
Borders suspended its quarterly dividend, which it will plow into operations.
Same-store domestic sales, or sales at stores open at least a year, were up 2.1 percent from the same quarter a year ago. Same-store sales are a key economic indicator.
The sales performance marked the third consecutive quarter of positive same-store sales at domestic Borders stores, and Jones said it shows Borders hasn't been as hard hit as some other retailers.
However, he noted: "We really thought we'd do better than that,"
For the full fiscal year, the company reported a loss of $157.4 million, or $2.68 a share, compared with a loss of $151.3 million, or $2.44, during the previous fiscal year. Revenue rose to $3.82 billion, from $3.72 billion.
The full-year results include a one-time $125.7 million after-tax loss related to the sale of the U.K. and Ireland bookstore operations and $27.7 million of after-tax non-operating charges.
Last March, Borders said it wouldn't provide sales or earnings guidance during a restructuring, but it said it anticipated returning to earnings per share growth in 2008. On Thursday, Jones said that may take a longer than expected.
The sales agreement announced Thursday gives Borders the option until Jan. 15 to require Pershing Square to pay $125 million for its international business, which includes Borders' Paperchase, Australia, New Zealand and Singapore subsidiaries. But Borders said it must pursue the sale of those operations elsewhere before any deal with Pershing.
Jones said six months to a year would be typical for the review under way right now concerning strategic plans.
Borders Group a year ago announced a restructuring that included a fresh face for its U.S. superstores and a jump back into online bookselling. Borders opened the first of its new concept stores last month and has said its new Borders.com Web site would debut by early May.
Jones said Borders will continue rolling out the concept stores this year, with 13 more planned.
Ann Arbor-based Borders said J.P. Morgan Securities Inc. and Merrill Lynch & Co. have been retained as the company's financial advisers to assist the company as it explores strategic alternatives.
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Comments
Posted by Bill M. @ 1:15 PM Thu, Mar 20, 2008
In a way Border's has only itself to blame. I've watched the selection of books dwindle over the years since they opened, and increasingly I've turned to Amazon for my book purchases. They took the chairs away. I still browse at Border's, and sometimes I come home with a book. But less often. During my last visit, they had begun to cut their stock even further by turning the books cover forward, thus reducing shelf space. I understand this is to be the new policy. Meanwhile more and more floor space is taken up with doo-dads, scrapbooks, ribbons, and download kiosks and such.
It doesn't help that Barnes & Noble opened a big store right across the corner. (What were they thinking??! Can anybody explain the mysteries of marketing to me?)
So as a frequent book buyer, I am finding Border's less and less important to my life. I miss the old mom and pop stores, and I especially miss book stores operated by people who really love books. The big chains seem to be run by bankers or accountants.
On the other hand, when Borders and B&N go down, I'll miss the pleasure of wandering the shelves, finding something interesting, opening it and reading a few pages then taking it home. And I'll miss my weekly magazine runs. What will take its place? I have no idea. With newspaper book pages shrinking, where will we find out about books we might want to read? (Borders, by the way, no longer carries The New York Times Book Review, a self-defeating decision; that's where I learned about a lot of the books that I bought.)Amazon is great for buying, terrible for browsing.
Maybe somebody will open a little corner book shop, somebody who really loves books and is content to make a modest living. Of course if it's at all successful, somebody eager to make a buck will buy the thing, figure out how to make even more bucks by dumbing it down, and end up killing it dead.
Who says the free market isn't a great system?
Posted by Joy Tipping @ 6:12 PM Thu, Mar 20, 2008
I'm very saddened by this, although, like Bill, I rarely actually *buy* anything at Borders these days. I browse there, then scurry home and buy with my Amazon prime account, which gives me free shipping and that Amazon discount, so it seems financially counterproductive to buy from anyone else.
Maybe Amazon should buy Borders ... then we could browse and buy from the same company, and the Amazon storefronts wouldn't be faced with being put out of business by the Amazon online empire.
But that leads to that nasty word, "monopoly," so maybe not. ... Of course, what Dallas does really need is a good independent bookstore. That's one of the things I miss most about living in Albuquerque, and one of the things I'm most looking forward to on an upcoming trip to Denver: A trip to the Tattered Cover.
Posted by L.A. Starks @ 5:12 PM Mon, Mar 24, 2008
I'm very sorry to hear about Borders' challenges. What I most enjoy about any bricks-and-mortar bookstore is the "point-of-sale" experience (a gasoline marketing term) or what Michael Bloomberg calls "random-access" (the advantage of newspapers). That is, I may walk into a bookstore with a list of titles, but then I find and can physically flip through other new books, or better books on the same subject, or other books by the same author. Don't think the concept works? When were you last in shopping at Whole Foods?