Ann Arbor-based Borders books loses $37.7 million as sales decline
The grim sales outlook for Borders Group Inc. continued this morning as the Ann Arbor-based bookstore chain reported deeper sales declines.
Borders is cutting its investment in multimedia inventory at its super stores.
Borders' overall sales slipped 12.7 percent to $595.5 million in the third quarter, compared to the same period in 2008. Sales at Borders super stores open at least a year declined 12.1 percent.
The company reported a loss of $37.7 million, down from a loss of $175.4 million in the third quarter of 2008. Borders has lost $169.3 million so far this year, compared to $216.3 million at the same time last year.
Borders CEO Ron Marshall called the financial results "both difficult and disappointing" in a call with investors this morning.
The earnings report comes as Borders is entering a crucial holiday season that some experts believe could be critical to its long-term survival.
The retailer is aggressively shifting its focus away from multimedia products such as movies and music. Borders added $16.8 million in its inventory of books but it slashed its multimedia inventory by $70.4 million at its super stores.
"I am for the first time since I joined the company generally pleased with the overall condition of our stores as we approach the holiday season," Marshall said.
In a continuation of its active cash conservation strategy, Borders spent just $6.8 million on store improvements in the third quarter, down from $17.9 million in 2008. Borders has spent $11.2 million on store upgrades this year, down 84.4 percent from 2008 -- which reflects the company's belief that it can't afford to invest heavily in stores during the economic crisis.
Sales in Borders' mall-based chain, Waldenbooks, dipped 20.3 percent in the third quarter, compared to the same period in 2008. The company now has 361 Waldenbooks stores, compared with 467 at the same time last year. But Borders announced three weeks ago that it would shutter 200 Waldenbooks stores.
Sales at Borders' chief rival, Barnes & Noble, reportedly increased by 4.3 percent to $1.2 billion, although sales at stores open at least a year slipped 3.2 percent. Barnes & Noble reported a loss of $24 million.
Borders employs more than 800 workers at its headquarters on Phoenix Drive in Ann Arbor's Research Park.
Borders stock (NYSE: BGP) was trading at $1.86 at 10:33 a.m., down 7.86 percent from its open of $2.01. Borders has 513 super stores and a total of about 25,000 employees.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter.
Comments
Macabre Sunset
Wed, Nov 25, 2009 : 5:20 p.m.
Depends on how many books are saved per reader. Manufacturing electronic devices is rather cheap - mostly sand and a bit of metal. How long they last and the cost of recycling are factors, of course. When you consider most of the obvious impact in global warming is due to deforestation, I think the e-readers win handily, though.
Woman in Ypsilanti
Wed, Nov 25, 2009 : 5:14 p.m.
Do you really think that an electronic device which almost certainly contains toxic heavy metals and which is only designed to last a few years is a better environmental choice than 100% biodegradable books? Yeah, there is the fuel involved with shipping and the energy that goes into the paper production but I suspect that when one considers the whole picture, e-readers dont come out ahead.
Macabre Sunset
Wed, Nov 25, 2009 : 4:21 p.m.
Rosie, those are luxuries our planet cannot afford. We have the technology to bring you thousands of books with very little destruction of our planet's resources. I haven't converted yet, but I expect that I will come to love my electronic reader in time.
racerx
Wed, Nov 25, 2009 : 4:10 a.m.
This is very well the end for Borders. I grew up here and remember the store on State St. There today and I saw a Coke refrigerator at the checkout line at the Arborland store. WTF? Is this Krogers now? There are trying anything, while the appeal of B&N is much more pleasing. At the checkout line, after standing for several minutes with others while only two clerks working the registers, I was bombarded with questions of donating to this, reward card that, reserve a copy of this...NO I just want to check out as quickly as possible!! Amazon contributed to its fall too, and B&N. The store has steadily gone down hill, despite the new super store, which is nice, but alas, to late. I have to laugh at CEO Ron Marshall when he says that the financial results have been "...both difficult and disappointing..." but later says, "...we've made the right steps to succeed..." OK. You loss $37.7B, results are disappointing, but you made the right steps to succeed!" LOL! Typical happy face CEO speak!
Michigan48103
Wed, Nov 25, 2009 : 1:15 a.m.
It would be a sad day if the wonderful Borders store on Liberty would close, I enjoy going there so much. Yes, the workers are not friendly and they can be a little rude some times, but that is the way of Ann Arbor stores. It seems like alot of the workers are Hippies from the 60's with the long hair and strange clothes and they are just not happy because they went to U of M and they have alot of degrees and no job are out there for the degree's that they got from the U of M so they are at Borders working and they are just not happy with their life. Recently, I heard that the Cd & DVD's will be gone soon and the store will just have books, if that does happen, I am sure they will be gone soon, that is the main reason that most people go there is for the wonderful Music and DVD department, you can buy books at any discount store now and if the Music is gone, the usualy customers will be gone.
Rosie
Wed, Nov 25, 2009 : 12:03 a.m.
To Macabre Sunset and ChrisW, I am only 32 and I would never think of reading a book on a device like a Kindle! I absolutely hate that I can't come home and curl up on the couch or in bed with my folded-up newspaper anymore. I hate scrolling down the page having to read things on the internet, dealing with the glare of the screen,having to deal with all the advertisements and other misc. items on every "page" of the internet. Age has nothing to do with it. I will always treasure the smell of a new book, being able to hold a book in my hands, turn the pages, easily hold it closer or farther away, mark pages of interest, etc. Books need nothing other than the reader- no websites, batteries, etc., just you and the book.
Nathan Bomey
Tue, Nov 24, 2009 : 4:23 p.m.
An update on Borders stock: Sunk 13.4 percent to close at $1.74. http://finance.yahoo.com/q?s=BGP
Macabre Sunset
Tue, Nov 24, 2009 : 4:23 p.m.
I'm sure there were those, centuries ago, who said the same about the printing press. Nothing like that hand-copied issue of Dark Ages Today to while away the hours. But I'll give you the opportunity to expand on the notion that somehow using an electronic reader somehow takes the "soul" out of a novel's content. I'm sure technophobes everywhere anxiously await your justification (though most, lacking computers, will have to wait until their great grand-daughters call them Sunday afternoon).
Jon Saalberg
Tue, Nov 24, 2009 : 2:39 p.m.
ebooks may become more popular, but real book lovers will never use an e-reader most of the time. Truly, a souless way to read.As for Borders, I only buy books at Nicola's and rarely, if ever, go to Borders. If I need a book, I look at half.com first. I almost always find books listed there for a fraction of the bricks and mortar store cost, and the books are pretty much new - plus, I don't waste gas driving to and from a store.
ChrisW
Tue, Nov 24, 2009 : 2:05 p.m.
Within 10 years eBooks will have destroyed nearly every bookstore on the planet. The quality of the readers isn't quite there yet, but it's getting close. They are like digital cameras were 10-15 years ago. Whether it's music, video, film, news, or books, the content delivery method is going to be over a network and not through retail chains.
aaparent
Tue, Nov 24, 2009 : 1:52 p.m.
I'm sad to say I don't like shopping there anymore. I hope Bivouac isn't the next local store to fall to online business (rei,moosejaw, etc) but the convenience of the online stores is hard to match. Border's customer service really fell when the the core staff left.
timeatwork
Tue, Nov 24, 2009 : 1:46 p.m.
i too find borders not as friendly of place to shop as barnes and noble. too bad though.
A2K
Tue, Nov 24, 2009 : 1:31 p.m.
I find having another card in my wallet to secure a sale at Border's to be annoying. I also had problems downloading coupons from the web site (i.e., not loading with standard browser etc.) I've been shopping at Border's since it was in the State St. location, and I still like shopping there. However, the price of even softbound books is astronomical: $14-$20 for softbound science-fiction? Gah, my salary has been flat since 2000 so I am forced to assuage my formidable reading habit by ordering from Amazon, visiting DawnTreader and the libraries, and only occasionally buying from Border's when I need instant gratification.
Macabre Sunset
Tue, Nov 24, 2009 : 1:27 p.m.
From the national perspective, there's just no need for so many book-based superstores. Borders has not been competitive on pricing, and the expansions into music have coincided with less people getting their music on CDs. I like browsing for books online better. I can dial up reviews instantly. I can see others' book lists. And the prices are much better. Diane, I won't be sorry. Your own buying behavior illustrates a store that has failed to adapt to the modern retail world.
Nathan Bomey
Tue, Nov 24, 2009 : 11:52 a.m.
With all the discussion about Borders' price point and coupons, I thought it might be worth adding this: Borders acknowledged in the call with investors that "promotional spending" (i.e. discounts, coupons) did not stimulate as much sales as it had expected.
John of Saline
Tue, Nov 24, 2009 : 11:52 a.m.
Time to start thinking about what to do with their space on Liberty Street once they close and vacate. Reopen Jacobson's? (I know, dream on. But I liked them.)
John Galt
Tue, Nov 24, 2009 : 11:51 a.m.
My prediction is that Borders will file for Bankruptcy after the holiday season. Not that I want it too, but Barnes & Noble and Amazon will crush them. Even Walmart got involved in a recent bestseller spat with the book companies. People do not read as many books, with the internet. And many people will buy from Amazon (with free shipping and lower prices). Too bad, because I like being able to browse. The smaller stores are OK, but not as large a selection.
Diane
Tue, Nov 24, 2009 : 11:13 a.m.
I am a loyal Borders customer. The only store that I actually buy books from is Borders. I don't want them to close. We need to have competition for Barnes and Noble. Sometimes, I buy books online from Amazon since they are so cheap and have a great selection. I almost always use a coupon at Borders though. I now wait for the Borders Rewards coupons to buy unless I really need that book right away. SUPPORT BORDERS. THEY'RE GREAT. IF YOU DON'T, YOU'LL BE SORRY.
Rod Johnson
Tue, Nov 24, 2009 : 11:10 a.m.
"It hasn't been the same since Joe Borders sold the business many years ago" That would be Tommy and Louie Borders... maybe you're thinking of Joe Gable, who was around until recently (I think I heard he retired not long ago).
Buddha Khan
Tue, Nov 24, 2009 : 11:08 a.m.
Current book deal with coupons through "free" Borders member card: Buy two Dr. Seuss books and get the third free. But look closer: Buying two at the Borders $8.99 price each means you get three for $17.98. Same books at Amazon are $4.99 everyday. This means three for $14.97. All of the "special" deals at Borders seem to be like this. Discounts that are always more than offset by an unrealistic starting price.
ChildeJake
Tue, Nov 24, 2009 : 10:48 a.m.
First off, my opinion is opposite of cook1888's. I much prefer the shopping environment at Borders to Barnes and Noble. Borders has more seating and customer terminals for title searches. By way of rebuttal to Buddha Khan's post, you can get books as cheap or cheaper than Amazon, if you utilize in-store coupons via the free member card they offer. And if you do in-store pick-up, Borders picks up the freight charges on your purchase. This is how I routinely do better buying local and in-person. I like having a bookstore to physically walk through.
Moose
Tue, Nov 24, 2009 : 10:16 a.m.
If Borders closes their doors, they'll also vacate their headquarters down on Phoenix Dr. It hasn't been the same since Joe Borders sold the business many years ago
Buddha Khan
Tue, Nov 24, 2009 : 10:15 a.m.
Select any book and cross shop it: 'Drawn to Life' by Walt Stanchfield, is just one example: Borders price: $29.95, Barnes and Noble price: $23.96, Amazon price: $19.77. I'm sure this is an oversimplification, but it seems that the incremental value that people place on having the physical store seems (far) less than the Borders business model can support.
cook1888
Tue, Nov 24, 2009 : 9:38 a.m.
I have been a customer of Borders since it was a true book lover's treasure trove on State Street. I still go there occasionally. I am not a marketing expert, however there is something about the atmosphere and layout at Barnes and Noble that is more appealing. Also, Borders has somehow missed the boat in promoting online sales. Amazon is still a better draw.