Borders Hits Store-Opening Goal

Borders Group’s new store openings for this year are essentially complete, as the company has cut capital expenditures to focus on strengthening its bottom line. But it will expand its new web site in-store, executives said at the company’s second quarter conference call. All but one of 14 new superstores (including two relocations) planned for this year have opened, said Ed Wilhelm, senior VP and CFO. All are in the company’s new concept, which reduces the space allocated to music, giving that space to children’s and bargain books. “We continue to be very pleased with the performance of our new concept stores,” Wilhelm said. “We will be applying what we learn from these to the rest of the chain where appropriate.”

The company opened four new Borders superstores in the United States during the period -- all of them new concept stores -- and ended the second quarter with a total of 518 domestic superstore locations. The number of Waldenbooks stores was reduced from 532 at the close of the second quarter 2007 to 468 at the end of the quarter. In coming months, the company’s new Borders.com e-commerce site will be introduced via kiosks to the superstores to become a true “cross-channel retailer,” according to CEO George Jones. “We made a true decision to get back into that business.”

“There continues to be a lot of opportunity in that area, and it will be a key driver for cash flow for us going forward,” Jones said. Consolidated sales from continuing operations were $749.2 million, down 6.9% from the same period last year. At Borders domestic superstores, comparable-store sales decreased by 8.9%, in significant part because of exceptional sales in the second quarter of last year, when the last Harry Potter book was released. Excluding the Potter factor, comp-store sales would have declined 5.1%. Waldenbooks’ comps declined 7.0% factoring in Potter, 1.4% without. But profitability has improved: the company lost $11.3 million, down from a loss of $18.1 million in the same period last year.

The international segment continues to downsize: During the quarter, Borders completed the sale of its Australia/New Zealand/Singapore businesses. It continues to examine strategic alternatives for its London-based Paperchase business, Jones said. Three Borders superstores in Puerto Rico and the company’s franchise operations in the United Arab Emirates and Malaysia remain.

Borders Group operates more than 1,100 stores worldwide primarily under the Borders and Waldenbooks brand names.

Source: GlobeSt.com

Barnes & Noble unlikely to bid for Borders: report

NEW YORK (MarketWatch) -- Barnes & Noble Inc. is not expected to bid for its main rival Borders Group Inc., according to a report Thursday in The Wall Street Journal, which cited people familiar with the situation.

The decision reflects tough lending markets that could have made financing difficult as well as concerns about the length of some of the leases Borders has signed, the newspaper reported.

Ann Arbor, Mich.-based bookseller Borders put itself up for sale in March due to potential liquidity problems and a failed foreign asset sale. At that time, the company determined that it needed more capital for 2008, and the difficult credit markets rendered some financing alternatives unavailable, Chief Executive George Jones said in a statement in March.

In May, The Wall Street Journal reported that Barnes & Noble had assembled a team to study a bid.

Barnes & Noble could still change its mind and make an offer, but Borders is hoping to complete the auction by the end of September, the Journal's latest report said. However, if Barnes & Noble does end up bidding for Borders, it's not clear whether antitrust authorities would clear the deal.

Both Barnes & Noble and Borders have faced increased competition from online retailers like Amazon.com while overall book sales haven't shown much growth, analysts have said. A combination between the two book giants could yield cost savings and bolster sales and profit, though the close physical proximity of some of the competing stores may pose a challenge.

Source: MarketWatch.com

Borders Group cuts nearly 275 corporate positions

DETROIT—Borders Group Inc. said Tuesday it is eliminating 20 percent of its corporate positions, or nearly 275 jobs, as part of an effort by the nation's second-largest bookseller to cut annual expenses by $120 million. Borders, which is more than a year into a restructuring and is considering selling off the company, said the cuts -- part of a cost-reduction plan announced last week -- represent less than 1 percent of its about 30,000 total work force.

"This is an important step in our company's cost reduction initiative that will improve our profitability and put us in a much better position for long-term success," Chief Executive George Jones said in a statement.

Borders has lost market share both to online retailers and to discounters amid a difficult U.S. economic climate. The company announced in March it would explore strategic alternatives, which could include a sale, and rival Barnes & Noble Inc. has assembled a management team to study the feasibility of a combination with Borders. Borders shares fell 5 cents to $6.14. The company said it is eliminating 156 corporate positions spread across nearly all departments of its Ann Arbor headquarters. And it said it has eliminated 118 corporate posts based outside headquarters. Borders has said it expects to save half of the $120 million this fiscal year. It's part of a broader effort that also includes improving cash flow, reducing debt and enhancing inventory productivity. The company also is working to cut non-payroll costs as part of the $120 million expense reduction target. That includes trimming costs for things such as utilities, travel, supplies and work with outside contractors.

Borders said last week its losses narrowed to $31.7 million, or 53 cents per share, in its fiscal first quarter ended May 3, compared with a loss of $35.9 million, or 61 cents per share, for the comparable period of 2007. The bookseller said revenue fell 0.8 percent to $792.5 million from $798.7 million. The company said headquarters employees were told of the cuts Tuesday. The jobs being cut outside headquarters include primarily corporate employees in distribution centers, the field marketing organization and the corporate sales division. Borders said those employees were told of the plans Monday. Borders said it will offer transition pay, severance packages, job placement assistance, counseling and other services. The cuts -- all from existing jobs, not open positions -- are limited to corporate employees except for what the company described as "less than a handful of positions." The cuts do not involve Borders or Waldenbooks store employees.

Source: Boston.com

Barnes & Noble weighing Borders bid

NEW YORK - Barnes & Noble Inc. appears to be getting more serious about buying chief rival Borders Group Inc., confirming Thursday that it put together a management team to study the "feasibility" of a combination.

The disclosure came as the nation's largest bookseller reported a wider loss in the first quarter on a tax-related charge and lowered its sales guidance for the year.

Speculation had been mounting about a possible Barnes & Noble-Border combination since Borders announced in March that it was putting itself up for sale and that it had lined up $42.5 million in financing to help it continue operations. At that time, Barnes & Noble said it would take a look at its rival.

Borders issued a statement on Thursday saying that the company is "in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date."

Booksellers are facing fierce competition from discounters like Wal-Mart Stores Inc., which has been aggressive about price-cutting.

Barnes & Noble officials declined to elaborate further regarding its review of Borders. But industry analysts say that a potential combination of Borders and Barnes & Noble would face numerous obstacles, from the challenge of pairing back a long list of overlapping stores to antitrust concerns from federal regulators.

New York-based Barnes & Noble said it lost $2.22 million, or 4 cents per share, in the quarter ended May 3. That compares with a loss of $1.67 million, or 3 cents per share, in the year-ago period.

Excluding the charge, the bookseller would have earned 5 cents per share. The charge was related to an agreement in principle with the State of California to settle its long-standing dispute regarding the collection of sales and use taxes on sales made by Barnes & Noble.com from 1999 to 2005. As a result, the company recorded a one-time pre-tax charge of approximately $8.3 million.

The company says revenues edged up to $1.16 billion in the first quarter, from $1.15 billion in the year-ago period.

Analysts surveyed by Thomson Financial expected a profit of 5 cents per share on revenues of $1.17 billion. The estimates typically exclude one-time items.
The company reported that same-store sales, or sales at stores open at least a year, declined 1.5 percent in the period.

Based on lower-than-expected sales and a challenging retail environment, the company said that it now expects same-store sales for the full year to be slightly negative instead of slightly positive. It also projected that same-store sales for the second quarter are expected to decline in the low- to mid-single digits from the year-ago period, when business was boosted by the July 2007 release of "Harry Potter and the Deathly Hallows".

The company said, however, that it is sticking with its full-year earnings per share forecast to be in the range of $1.70 to $1.90 based on a reduced fully diluted share count of 58.5 million shares as a result of the share repurchase activity. Second-quarter earnings per share are expected to be in a range of 8 cents to 13 cents. Analysts forecast 9 cents per share in the second quarter.
Barnes & Noble's shares fell 8 cents to $29.87 Thursday. Borders shares rose 8 cents to $6.99.

Source: Forbes.com

Barnes + Noble Mulls a Borders Buy

An acquisition could help both, but would a tieup of the U.S.'s two biggest booksellers be able to win FTC approval?

by Aaron Pressman

Barnes & Noble (BKS), the giant bookseller built through acquisition, may be on the verge of its biggest deal yet as it weighs bidding for top competitor Borders Group (BGP). Analysts say the deal could bolster Barnes & Nobles' bottom line at a price tag, including debt, of well over $1 billion.

Investors are left wondering whether a combination of the top two national book chains could pass antitrust muster. Former government regulators say the question will come down to just how national the book market has become. The growth of Amazon.com (AMZN) and booming book sales by big-box retailers such as Wal-Mart Stores (WMT) and Target (TGT) could provide enough cover to let the once unimaginable deal gain approval.

"There may be a lot of complaining but at the end of the day, it's highly unlikely it would be enough to block it," says Michael McFalls, an attorney at Jones Day in Washington, D.C., who worked at the Federal Trade Commission from 1997 to 2000. Of course, if the FTC turned up damning e-mails or other troubling evidence, all bets would be off, he says. The commission tried to block Whole Foods Market's (WFMI) deal to buy Wild Oats, for example, after finding statements from Whole Foods' CEO about avoiding "nasty price wars." A federal court eventually let the deal go through.

Other Players

Borders, which saw sales decline 2% in its most recent quarter, said on Mar. 20 that it was considering selling all or part of the company. Shares of the Ann Arbor (Mich.) chain have lost almost 70% over the past year as profits slipped. The company reported a net loss of $157 million for 2007.

Prompted by Borders' announcement, Barnes & Noble Chief Operating Officer Mitchell Klipper told analysts his company would "certainly take a good look" at the possible acquisition. Spokeswomen for both companies on May 21 declined to comment on a report in The Wall Street Journal (NWS) that Barnes & Noble had assembled a team of executives and advisers to study a deal. The company could have competition to buy Borders, though. The Journal also reported that 30 people representing a variety of private equity firms and other potential buyers had signed or were likely to sign confidentiality agreements to view Borders' finances.

Shares of Borders rose 9%, to 6.91, on May 21, and are up 36% in the two months since the company announced it was looking for a buyer. Barnes & Noble shares were unchanged at 29.95 on May 21, on volume that was more than double the stock's daily average.

Amazon Effect

Antitrust regulators will look closely at the effects, if any, that Borders stores have on prices and service at nearby Barnes & Noble stores. When Staples (SPLS) sought to buy competitor Office Depot (ODP) in 1997, the Federal Trade Commission discovered that Staples charged lower prices at outlets near Office Depot stores. But when Federated Department Stores (M) sought to buy May Department Stores, the FTC approved, concluding that department stores essentially operated in a national market without regard for the proximity of competing chains.

"If book prices are the same whether or not there's a Borders around, then you are talking about an overall national market," says Deborah Feinstein, a partner at Arnold & Porter in Washington, D.C.

Amazon's impact could also help convince regulators to approve a deal. While 60% of consumers buying books last year shopped at bookstores, 20% bought online and 34% went to bigger retailers like Wal-Mart, according to a survey by Simmons Market Research Bureau. "Bookstores are still the most common place to buy a book, but their share keeps shrinking," says Michael Norris, book publishing analyst at Simba Information, a market research firm in Stamford, Conn.

"Dreary Sameness"

Leonard Riggio, who bought New York-based Barnes & Noble in 1971 for $750,000, built the chain with a series of rapid acquisitions in the 1980s, absorbing competing companies like B. Dalton Bookseller, Doubleday, and Bookstop. But the dealmaking largely ground to a halt after Barnes & Noble was forced to abandon a bid for Ingram Book Group, at the time the largest book wholesaler. Barnes & Noble pulled out of the deal in 1999 after independent booksellers convinced FTC staff to oppose the transaction.

There's likely to be less opposition from independent bookstore owners to a Borders deal. Ingram was in essence a common supplier, not a competitor, to both Barnes & Noble and independent booksellers. Borders is just another big chain.

"The landscape would definitely change, and it would change in the direction of less diversity, less choice, less selection, [and] more sameness everywhere," says Steve Bercu, owner of BookPeople in Austin, Tex., and a member of the board of directors of the American Booksellers Assn. "My bet is on consumers looking for indies as their alternative to dreary sameness."

Source: Business Week

Borders Signs Lease to Open New Concept Store in Wareham, Mass.

ANN ARBOR, Mich., April 16 /PRNewswire/ -- Borders, Inc. announced today that it will open a store in Wareham, Mass. in June, when the retailer will debut a new 25,401-square-foot store at Wareham Crossing, located at Highway 28 and Interstate 495. The store will be one of 14 concept stores that Borders will open this year nationwide. The concept store is a retail breakthrough that represents a significant enhancement over existing Borders stores. Borders concept stores bring together digital and Internet options with a fresh new look, a host of enriching in-store services, and a number of exciting features that help fulfill Borders' mission to be a headquarters for knowledge and entertainment.

"We're delighted to have signed on to open a concept store at Wareham Crossing," said Vince Vizza, vice president of real estate for Borders Group. "Wareham is only one of 14 cities in the entire nation to get a Borders concept store in 2008. With its many avid book, music and movie lovers - together with its vibrant culture and rich history - Wareham is a wonderful community for a concept store, and we are anxious for customers to start enjoying all that the store will offer."

The store will provide customers with a unique and engaging shopping experience, the new Borders concept store will offer what customers have always loved about Borders - deep and intelligent selection, knowledgeable staff, and a comfortable, welcoming atmosphere - plus an exciting interactive dimension that includes enriching Web-based services accessible right in the store.

Highlights of the store include:

• A Digital Center where customers can do everything from mix and make their own CDs and download books and music to publish their own books, explore their family history, and create photo books. Importantly, trained, dedicated specialists are ready to assist customers of all technical levels with any of the Digital Center's services and products.
• Special Destinations for Cooking, Wellness, Travel, Graphic Novels and Children's that feature books, DVDs and related merchandise as well as topical programming shown via 32" LCD screens. Some destinations also include computer kiosks where customers can take advantage of a number of digital and Internet options to maximize their in-Destination experiences.
• A fresh new interior with dazzling graphics that both guide customers to the Destinations as well as inspire them to shop the entire store's diverse and relevant assortment of up to 170,000 book, music and movie titles. A warm, neutral color scheme and plenty of cozy seating suggest comfort and an invitation for customers to stay as long as they like.
• Enriching and enjoyable community events featuring appearances by authors and performers as well as free activities for children that may include storytime events, summer camps, author signings and other kid-focused store events.
• A Seattle's Best Coffee(R) cafe that will serve its full line of premium coffee and non-coffee beverages, including lattes, mochas and blended beverages, and a fresh food menu, featuring pastries and sandwiches.
• A Paperchase shop with a wide selection of fashionable notebooks, journals, wrapping paper, greeting cards and other gifts and stationery items from U.K.-based Paperchase(R) Products Limited.
• Internet access available storewide. Through an alliance with T-Mobile(R), Borders stores are T-Mobile HotSpots(R), allowing customers using Wi-Fi enabled laptops or PDAs with a T-Mobile account the ability to comfortably surf the Web, access email, connect to their corporate network, or download large files all while connected to the nation's largest, carrier-owned Wi-Fi network.
• Multiple self-serve Borders Search stations offering customers the opportunity to check the availability of a particular title and where it is located within the store. After Borders' proprietary e-commerce site, Borders.com, launches this year, customers will be able to order books, music and movies right at the kiosk and have their order shipped directly to their house or to the store of their choice for pick up at a later time. In addition, the stations in each store's music department will give customers the chance to listen to a CD before purchasing it.
• "Borders Recommends" titles and reviews displayed throughout the store. In addition, knowledgeable booksellers are happy to suggest titles suited to each customer.
• The Borders Original Voices program, now in its 12th year, highlights the work of new and emerging authors and artists and helps Borders share its passion for books, music, and movies with customers from one enthusiast to another. Over the course of a year, more than 200 new works are featured in Borders stores.

Customers who shop at this store - and at any Borders, Waldenbooks or Borders Express store - are eligible to become Borders Rewards(R) members. Borders Rewards is the company's free loyalty program where all purchases count toward earning Borders Bucks that can be used on future purchases. Members also enjoy exclusive Borders Rewards Bonus Events and receive members-only coupons and savings opportunities throughout the year. Customers can also participate in the Borders Group Savings and Services Program, which offers discounts, deferred billing, complimentary price quotes as well as specialized customer service to businesses, schools, libraries and non-profit groups. Membership in this program is also free.

The opening of this new concept store is expected to create approximately 45 jobs in the local community. Employment opportunities at Borders in Wareham will be posted online and available in May. To apply, please visit Borders at www.borders.jobs .


Source: Borders, Inc.

Pershing Square's Borders stake could rise to 28.8%

April 15 (Reuters) - Borders Group's (BGP.N: Quote, Profile, Research) largest shareholder, Pershing Square Capital Management, could see its stake in the No. 2 specialty bookseller rise to 28.8 percent if the hedge fund exercises warrants to acquire about 9.55 million shares, according to a regulatory filing.

Activist investor William Ackman's Pershing Square Capital said its ownership stake was calculated based on 60.5 million shares outstanding as of April 4, 2008.

In an earlier filing, Pershing Square had reported an 18 percent stake in Borders, calculated on the basis of 58.8 million shares outstanding as of Nov. 29, 2007.

Borders and Pershing Square recently revised a financing agreement to give the retailer more time to implement new strategies.

The new agreement offers Borders a lower interest rate of 9.8 percent on a $42.5 million loan from Pershing Square, down from 12.5 percent before.

The new deal also raises the price of a backstop purchase offer from Pershing Square for Borders' international subsidiaries to $135 million from $125 million.

Under the agreement, Borders has the right but not the obligation until Jan. 15, 2009, to sell the units in Australia, New Zealand, Singapore and Britain to Pershing Square, if Borders does not get a better offer before then.

Borders has said the international units are worth substantially more than $135 million and it is looking at strategic alternatives other than the Pershing Square deal.

The new financing commitment also gives Pershing Square warrants to buy 9.55 million shares of Borders at $7 apiece, down from 14.7 million shares in a previous agreement.

Shares of the company were down almost 4 percent at $6.30 in afternoon trade on the New York Stock Exchange.

Borders, which has been considering selling itself, has been under pressure like many other booksellers as rising gasoline and food prices take more of consumers' discretionary income.

Source: Reuters

Borders explores sale, suspends dividend

NEW YORK (Reuters) - Book retailer Borders Group Inc (NYSE:BGP - News) on Thursday suspended its quarterly dividend and said it was reviewing strategic options, including the sale of some or all of its businesses.

The company, which also posted a quarterly profit, said its largest shareholder, Pershing Square Capital Management, had offered to purchase some of its businesses in Australia, New Zealand, Singapore and the United Kingdom for $125 million.

Borders has the right, but not the obligation, to require the hedge fund to buy those assets under the backstop purchase offer.

Pershing Square, the company's largest shareholder, also has agreed to loan Borders $42.5 million and will receive options to buy a 19.99 percent stake in the company at $7 a share. The stock closed on Wednesday at $7.10.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Borders Chief Executive George Jones said in a statement. "Looking forward to 2008 and beyond, the company determined that additional capital was required to execute our operating plan."

Without the funding, the company may have faced liquidity issues in the next few months, Jones said. It said it was suspending the dividend to preserve capital for operations and strategic initiatives.

Borders said it had appointed JPMorgan Securities (NYSE:JPM - News) and Merrill Lynch & Co (NYSE:MER - News) as financial advisors.

The company reported net profit of $64.7 million, or $1.10 a share, for the fourth quarter ended on February 2, compared with a year-earlier loss of $73.6 million, or $1.25 per share, that included large charges for closing Waldenbooks stores.

Excluding nonoperating charges and discontinued operations, earnings were $1.44 a share.

Analysts on average expected $1.42 per share, according to Reuters Estimates.

Revenue fell to $1.35 billion from $1.37 billion, but Borders said sales were up 2.8 percent after excluding the impact of an extra week in the year-earlier period.

Jones said that although the company was on track to reach its financial targets, worsening economic conditions would slow its progress.

Borders, the No. 2 U.S. bookseller behind Barnes & Noble Inc (NYSE:BKS - News), began a turnaround plan last year. It is closing underperforming Waldenbooks stores, weighing options for its international units, and refocusing on its core U.S. store operations.

The retailer is trying to fend off competition not only from Barnes & Noble, but also from online retailers, where consumers have been turning for cheaper books, CDs and DVDs.

Source: Reuters