Borders Bookstores May Be Up for Sale

(20 March 2008) Borders Group Inc., the second-largest bookstore chain in the United States after Barnes & Noble Inc., announced today that it will be exploring strategic alternatives, including the sale of the company or its divisions in order to maximize shareholder value, according to a statement released to PR Newswire.

"The bookstore chain reported lower-than-expected fourth-quarter profits of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.25 a share, a year earlier," according to Bloomberg News. As a result it is suspending its monthly dividend.

Borders has been facing stiff competition, not only from brick-and-mortar rivals like Barnes & Noble, but online retailers as well, such as Amazon.com and Wal-Mart.

Borders also suffered a US$7 million loss as a result of the sale of its UK and Ireland book-store operations and US$13 million in nonoperating charges, according to the Wall Street Journal.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," said Borders Group Chief Executive Officer George Jones, according to the press release. "Looking forward to 2008 and beyond, the company determined that additional capital was required to execute our operating plan, and as a result we began to explore various financing options. The current credit environment has made many of these alternatives prohibitively expensive or entirely unavailable."

To jump-start sales, the bookstore chain is sharply increasing the number of titles it displays on shelves with the covers face-out, according to the Wall Street Journal. Because that takes up more room than how books are traditionally displayed in Borders stores, the new approach will require a typical Borders superstore to shrink its number of titles by 5% to 10%.

To see the Reuters news story on this, click here.