Borders bankrupt

[Don]

http://www.latimes.com/business/la-fi-b ... 4146.story

Bookseller Borders, which helped pioneer superstores that put countless mom-and-pop bookshops out of business, filed for bankruptcy protection Wednesday, sunk by crushing debt and sluggishness in adapting to a rapidly changing industry.

The 40-year-old company plans to close about 200 of its 642 stores over the next few weeks. All of the stores closed will be superstores, Borders spokeswoman Mary Davis said. The company also operates smaller Waldenbooks and Borders Express stores.

Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. Borders said it is losing about $2 million a day at the stores it plans to close.

Cautious consumer spending, negotiations with vendors and a lack of liquidity made it clear Borders "does not have the capital resources it needs to be a viable competitor," Borders Group Inc. President Mike Edwards said in a written statement.

Borders plans to operate normally and honor gift cards and its loyalty program as it reorganizes.

The company will receive $505 million in debtor-in-possession financing from GE Capital and others to help it reorganize.

According to the Chapter 11 filing, Borders had $1.28 billion in assets and $1.29 billion in debts as of Dec. 25.

It owes tens of millions of dollars to publishers, including $41.1 million to Penguin Putnam, $36.9 million to Hachette Book Group, $33.8 million to Simon & Schuster and $33.5 million to Random House.

It's significant that Borders could not reach an agreement with creditors and file a "prepackaged bankruptcy." Said Nejat Seyhun, a bankruptcy expert at the University of Michigan.

It could be a sign that creditors do not believe Borders will be a "viable operation going forward," Seyhun said.

Activist investor William Ackman, whose Pershing Square Management Co. has a nearly 15 percent stake in the company, also stands to be a big loser. Shareholders are often wiped out in a reorganization.

He offered to finance a $16-per-share Borders-led takeover bid for rival Barnes & Noble in December, but nothing materialized.

The filing was expected, but it is far from clear if it will be enough to save the company.

"They are going to have to be an entirely different company than the one that went into bankruptcy protection if they want to emerge successfully," said Jim McTevia, managing partner of turnaround firm McTevia & Associates in Bingham Farms, Mich.

It has been a long fall for the Ann Arbor, Mich., company, which 15 years ago appeared to be the future of bookselling.

Big-box bookstores have struggled as competition has become increasingly tough as books become available in more locations, from Costco to Walmart, online sales grow and electronic books gain in popularity.

Borders also suffered from a series of errors: failing to catch onto the growing importance of the Web and electronic books, not reacting quickly enough to declining music and DVD sales, and hiring four CEOs in 5 years without book-selling experience.

"Books and content just became so available at so many other locations, online and offline, the 'grow, rinse, repeat' mindset just wouldn't work anymore," said Michael Norris, senior trade analyst at Simba Information.

In addition, Americans are simply buying fewer books. Sales fell nearly 5 percent in 2010 to 717.8 million from 751.7 million last year, according to Nielsen, which tracks about 70 percent of book sales but doesn't include Walmart stores.

For book lovers who like to shop in stores, the news was worrisome.

"It's just really sad to hear that happening," said Monika Barera, 50, shopping Wednesday at a Borders store in its hometown of Ann Arbor, Mich. The downtown store she was shopping at isn't closing, but four others in Michigan are. "I just hope they can find a way through."

At its peak in 2003, Borders operated 1,249 Borders and Waldenbooks stores. Now it operates barely half that. Its annual revenue has fallen by about $1 billion since 2006, the last year it reported a profit.

Borders' rival Barnes & Noble, which has 29.8 percent of the book market compared with Borders' 14.3 percent according to IBIS World, has done better by adapting to e-commerce and electronic books more quickly and keeping management stable.

Tom and Louis Borders opened their first store in 1971, selling used books in Ann Arbor, Mich. At the time the brothers were mostly interested in offering other bookstores a system they'd developed for managing inventory.

But in 1973, the store moved to a larger location and starting selling new books. The brothers decided to focus on opening more bookstores.

The birth of the superstore was still a decade away. The Waldenbooks and B. Dalton mall chains, with small, 2,000-square-foot stores and 20,000 to 50,000 titles, were growing rapidly.

Against this backdrop, Borders opened its second location in 1986. From there, the company opened one or two bookstores a year; the pace eventually increased to 40 a year.

The new superstores, in contrast to mall chains, ran 10,000 to 15,000 square feet and offered between 100,000 and 200,000 titles and enticements to linger like comfortable chairs and attractive lighting.

Kmart Corp. saw the potential and acquired Borders in 1992, forming a book unit with Waldenbooks. It then spun the bookstores off as a separate company in 1995, the same year a company called Amazon.com started selling books online.

Analysts say a key error for Borders came in 2001, when it contracted out its e-commerce business to Amazon.com.

"Termites don't team with Orkin," said Simba Information's Norris. "Amazon had no incentive whatsoever to promote Borders. … It really marked the beginning of the end."

That relationship lasted until 2006. By then, Borders lagged far behind Barnes & Noble, which had been selling books online since 1997.

By the time Borders' current CEO, financier Bennett LeBow, came aboard in May 2010 after investing $25 million into the company, the ship was listing badly.

Fordham University marking professor Al Greco said Borders can operate with fewer stores, but the same challenges remain, Greco said.

"This is not a good day for book retailers, book readers and book publishers," Greco said. "It's a serious problem that a major chain that did a nice job for many years could not survive."

[Memorex]

The only good news is that my company got a piece of the work in this case.

[bluejeangirl76]

Bummer. But I do prefer Barnes & Noble anyway. I don't mind Borders for books, but their DVD & Music section SUCKS. B&N seems to be a decent place to find uncommon DVDs, so I go there if other places don't have something I'm looking for.

[Rhiannon]

Clearance sale at Borders? ...So there.

[Deb]

Bummer. But I do prefer Barnes & Noble anyway. I don't mind Borders for books, but their DVD & Music section SUCKS. B&N seems to be a decent place to find uncommon DVDs, so I go there if other places don't have something I'm looking for.

I remember a couple Cali friends taking me to huge new and used music store in Hollywood first time I was down there, for the life of me I can't recall the name right now, but I believe it was on Sunset or Cahwenga maybe? I think it had a big mural on it? But it was 2 floors, had all kinds of rare music goodies.

[bluejeangirl76]

Clearance sale at Borders? ...So there.

Probably not, unfortunately. They're only closing roughly 1/3 of the stores, so I would guess that probably a lot of the inventory will be shifted to the other stores and to Amazon.

[youkeepmewaiting]

All the Borders shops in Britain went last year. Was very sad to see.

[Don]

Clearance sale at Borders? ...So there.

Probably not, unfortunately. They're only closing roughly 1/3 of the stores, so I would guess that probably a lot of the inventory will be shifted to the other stores and to Amazon.

Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. Borders said it is losing about $2 million a day at the stores it plans to close.

They don't even have money to reship stock to other stores.

[bluejeangirl76]

Clearance sale at Borders? ...So there.

Probably not, unfortunately. They're only closing roughly 1/3 of the stores, so I would guess that probably a lot of the inventory will be shifted to the other stores and to Amazon.

Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. Borders said it is losing about $2 million a day at the stores it plans to close.

They don't even have money to reship stock to other stores.

I missed the line about the sales. Well, then I stand corrected. I don't know what constitutes a "superstore" (the ones they are closing) vs. a regular store, though - they all look the same to me... well, if they close the one by my house, I hope Barnes and Noble takes the space!!

[Don]

Clearance sale at Borders? ...So there.

Probably not, unfortunately. They're only closing roughly 1/3 of the stores, so I would guess that probably a lot of the inventory will be shifted to the other stores and to Amazon.

Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. Borders said it is losing about $2 million a day at the stores it plans to close.

They don't even have money to reship stock to other stores.

I missed the line about the sales. Well, then I stand corrected. I don't know what constitutes a "superstore" (the ones they are closing) vs. a regular store, though - they all look the same to me... well, if they close the one by my house, I hope Barnes and Noble takes the space!!

They weren't allowed to do a prepackaged bankruptcy because the odds are they going down, just like Circuit City.

[verslibre]

Bummer. But I do prefer Barnes & Noble anyway. I don't mind Borders for books, but their DVD & Music section SUCKS. B&N seems to be a decent place to find uncommon DVDs, so I go there if other places don't have something I'm looking for.

I remember a couple Cali friends taking me to huge new and used music store in Hollywood first time I was down there, for the life of me I can't recall the name right now, but I believe it was on Sunset or Cahwenga maybe? I think it had a big mural on it? But it was 2 floors, had all kinds of rare music goodies.

Amoeba.

[verslibre]

Analysts say a key error for Borders came in 2001, when it contracted out its e-commerce business to Amazon.com.

"Termites don't team with Orkin," said Simba Information's Norris. "Amazon had no incentive whatsoever to promote Borders. … It really marked the beginning of the end."

That relationship lasted until 2006. By then, Borders lagged far behind Barnes & Noble, which had been selling books online since 1997.

Wow. That was stupid.

Looks like B&N is going to enjoy being Numero Uno again.

[Ehwmatt]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

[Gin and Tonic Sky]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

I know it used to be that you'd go in there to get a peek at the dirty magazines in a more comfortable setting than your local 7-11. Now you can do that over the internet too.

[verslibre]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

Some of us are still "old-fashioned" and prefer to actually browse music and mags and books & shit. Browsing online is cool, too, but there's something about actually being in a place with rows and rows of merch.

[lights1961]

its a bummer... but yes, Borders screwed up when they did not develope their own e book store and embraced the technology... kind of like the music industry, IE record stores and companies... back in 1998-to present who did not or not willing to embrace the internet for music downloads... and a lot of travel companies who did not embrace the internet, same thing happening to them.


R

[Ehwmatt]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

Some of us are still "old-fashioned" and prefer to actually browse music and mags and books & shit. Browsing online is cool, too, but there's something about actually being in a place with rows and rows of merch.

It's funny, I'm that way with a lot of stuff, but not with books/music shopping. But Amazon is just such a killer site, and it's amazing how dead-on their "Stuff You Might Like" feature is. Plus, obviously, NO physical bookstore can compete with their selection.

[lights1961]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

Some of us are still "old-fashioned" and prefer to actually browse music and mags and books & shit. Browsing online is cool, too, but there's something about actually being in a place with rows and rows of merch.

It's funny, I'm that way with a lot of stuff, but not with books/music shopping. But Amazon is just such a killer site, and it's amazing how dead-on their "Stuff You Might Like" feature is. Plus, obviously, NO physical bookstore can compete with their selection.

thats why milllions of retail employees who pay taxes will be out of work at sometime during the next probably 10-15 years...

[Deb]

Bummer. But I do prefer Barnes & Noble anyway. I don't mind Borders for books, but their DVD & Music section SUCKS. B&N seems to be a decent place to find uncommon DVDs, so I go there if other places don't have something I'm looking for.

I remember a couple Cali friends taking me to huge new and used music store in Hollywood first time I was down there, for the life of me I can't recall the name right now, but I believe it was on Sunset or Cahwenga maybe? I think it had a big mural on it? But it was 2 floors, had all kinds of rare music goodies.

Amoeba.

Thats the one. Thanks.

[Melissa]

I wonder if B&N would take over Borders stores that close, kind of like when Linens & Things closed and now Bed, Bath & Beyond are taking those spaces.

[Don]

I wonder if B&N would take over Borders stores that close, kind of like when Linens & Things closed and now Bed, Bath & Beyond are taking those spaces.

I don't think so. The reason that B&N has survived is because they avoided over expanding, and with online commerce becoming more and more the norm, I would think them to maintain their current physical store numbers or even reduce them.

On the other hand, a lot of companies do the exact opposite of what the market dictates, hence the need for Chapter eleven to bail them out.

[bluejeangirl76]

I only use Amazon anyway. No reason to go to those book stores unless I happen to be near one and looking to kill time or to just look around for ideas to buy online.

Some of us are still "old-fashioned" and prefer to actually browse music and mags and books & shit. Browsing online is cool, too, but there's something about actually being in a place with rows and rows of merch.

I agree! I love book stores! I could wander around in B&N for hours.
And hell, they even have Starbucks in there, so I am *SET*

I use Amazon or B&N online if it's something that isn't available at the store for whatever reason, or harder-to-find items, sometimes out-of-print items... that kind of thing.

[Rhiannon]

I pretty much live in bookstores. I need an intervention.

[bluejeangirl76]

I pretty much live in bookstores. I need an intervention.

No you don't. At least you have active, intelligent interests and are expanding your mind, instead of sitting around turning into a big drooling vegetable staring at the big glowing box or the interwebs all day or something. More people should read as much as you do. Hell if I could get through ONE of the 15 different books I have started lately, I'd be happy.

[RedWingFan]

Clearance sale at Borders? ...So there.

Me too.

[geminix]

This is really hard to believe considering all the people that come in to the stores to pick up a book and go to sit down and read it...FOR FREE

[StevePerryHair]

I have a Border's reward card, and I got this "letter from the CEO" tonight:

[Don]

They are toast.

[StevePerryHair]

They are toast.

Yeah, I'm thinking I will have to use the gift cards we've had around for a long time, SOON!

[Don]

They are toast.

Yeah, I'm thinking I will have to use the gift cards we've had around for a long time, SOON!

Circuit Cty put out the same type of communication, and were gone in less than six months.