Borders in trouble - B&N not much better

Not at Borders, it really means more space for Greeting Cards.

 

Only in your fantasies of yesterday.

 

More magazines and calendars!

 

Borders will be in bankruptcy by the summer. I think these 50% off coupons that are now being offered more and more are nothing other than a secret liquidation sale by the company's management. Borders will likely follow Circuit City into the grave...

 

In Today's news . . .

BORDERS GROUP'S GENERAL COUNSEL & CIO RESIGN; SHARES TRADING LOWER (BGP)
Jan 04, 2011 (SmarTrend News Watch via COMTEX)

Officials from Borders Group, Inc. (NYSE:BGP) said the firm's General Counsel, Thomas D. Carney, and Chief Information Officer, D. Scott Laverty, resigned, Bloomberg reports Tuesday.

Shares of the retailer are trading 7.33% lower on the news at $0.89.

Borders Group, through its subsidiaries, operates book superstores and mall-based bookstores throughout the United States.

The company operates superstores under the Borders name, mall-based bookstores under the Waldenbooks name, and bookstores under the Books etc. name.

Borders has a potential upside of 13.6% based on a current price of $0.88, and an average consensus analyst price target of $1.00.

Borders is currently below its 50-day moving average (MA) of $1.18 and below its 200-day MA of $1.58.

In the last five trading sessions, the 50-day MA has fallen 1.41%, while the 200-day MA has slid 0.99%.

The company has reported $2.5 billion in sales over the past 12 months and is expected to report $2.2 billion in sales in the next fiscal year.

Write to Chip Brian at [email protected]​

http://www.zacks.com/research/get_news.php?id=004l3281

 

Borders General Counsel Thomas Carney Resigns
David Hechler
Corporate Counsel
January 05, 2011

Borders Group, Inc. may have a problem: Executives seem to be moving faster than books at the financially strapped book chain.

On Jan. 2 general counsel Thomas Carney resigned. The next day chief information officer D. Scott Laverty followed him.

The company, based in Ann Arbor, Mich., announced the departures Monday in a Securities and Exchange Commission filing with no accompanying press release or elaboration. And with no general counsel to sign the filing, Borders' new chief financial officer, who has been in his job only since October, took over that responsibility.

"We have evaluated our leadership structure," the company told The Wall Street Journal, "and as a result, some positions have been eliminated."

This does not seem to be a great time for Borders to be without a top lawyer. Though money is clearly tight, and the company will avoid having to pay another executive salary (Carney made $300,000 in 2009), they may soon miss him.

Last week the company announced it would delay paying publishers. On Monday executives said they were meeting with publishers this week to discuss the situation. Though Borders spokeswoman Mary Davis told The New York Times that the company is not in a liquidity crisis, it's hard to avoid that impression.

The company has seen declining sales for years — as has the entire industry. Its third quarter results, announced in December, revealed a $74 million loss for the quarter and double-digit decreases in both year-to-year and comparable store sales. And just for good measure, its online sales also declined. The stock is trading at under $1.

Analysts, who have long speculated about a possible bankruptcy filing, have more fodder than ever. And as the company scrambled to prepare for that possibility, and struggled to refinance in the hope of avoiding it, executives may wish they had their longtime lawyer down the hall.

Carney had been the company's vice president, general counsel, and secretary since 1994. He was promoted to senior VP in 2004 and executive VP four years later. A graduate of the University of Michigan and its law school, Carney was a partner at Dickinson, Wright, Moon, Van Dusen & Freeman in Detroit before joining the bookseller.

A phone call to Borders' executive offices was not returned, and Carney could not be reached for comment.

​

http://www.law.com/jsp/cc/PubArticl...Borders_General_Counsel_Thomas_Carney_Resigns

 

Little tidbits continue to come in. This point is worth underlining:

In any event, as PW observes, “Right now, in the face of Borders’ suspending payments, publishers don’t have much choice but to accept the bank’s terms.”

And whatever those terms are, time is running out. As a Forbes report details, Borders stock continued its plunged another 12.5% yesterday.

And oh by the way, guess what company is thinking of making an offer for those less and less costly shares? Right — according to the Forbes report, it’s B&N.

Borders death spiral continues, with no help from B&N
5 January 2011
Another dramatic development in the Borders story yesterday: The nation’s number one brick and mortar book retailer, Barnes & Noble, which initially declined comment on Borders’ predicament, changed its mind and issued a doozy, according to a Publishers Weekly report by Calvin Reid and Jim Milliot.

On a day when Borders execs were supposedly meeting with Big Six publishers to plead for better terms in order to avoid bankruptcy, B&N issued a statement making it hard for publishers to do so. “We think the playing field should be even,” the B&N statement warns publishers. “We expect publishers to offer same terms to all other booksellers, including Barnes & Noble and independent booksellers. We fully expect publisher’s will require Borders to pay their bills on the same basis upon which all other booksellers pay theirs. Any changes in publishers terms should be made available to all.”

As the PW report notes, it’s not exactly an unfair demand: “If publishers are, in effect, giving Borders more attractive terms—i.e. a much longer time before having to make a payment—is this an unfair advantage over other retail chains as well as independent bookstores who are also struggling in the current economic climate?”

On the other hand, keeping Borders alive is an imperative for not only the publishers, whom Borders owes a significant amount of money, but for the rest of the industry, too. Such a significant loss of bookstores means a huge lessening of the presence of books in our culture, less opportunity for readers, and less healthy competition for the two behemoth retailers left standing, Amazon and B&N. Which all makes it odd — and unfortunate — that the American Booksellers Association has yet to issue a comment on the situation.

In any event, as PW observes, “Right now, in the face of Borders’ suspending payments, publishers don’t have much choice but to accept the bank’s terms.”

And whatever those terms are, time is running out. As a Forbes report details, Borders stock continued its plunged another 12.5% yesterday.

And oh by the way, guess what company is thinking of making an offer for those less and less costly shares? Right — according to the Forbes report, it’s B&N.

​

http://mhpbooks.com/mobylives/?p=26346

 

Wanna buy HQ?


http://www.annarbor.com/business-re...fecting-stock-price-of-landlord-agree-realty/

 

Do the numbers

A bankruptcy expert crunches the numbers, comes up with the expected result. Favorite quote—

"My experience is when companies strategically merge in bankruptcy, they don't need two headquarters." ​

From Nathan Bomey at the AnnArbor.com website:

A top bankruptcy expert at the University of Michigan Law School said recent events indicate Ann Arbor-based Borders Group Inc. is toppling toward a bankruptcy filing or a merger with competitor Barnes & Noble.
“One of those things will happen within the next few months,” U-M law professor John Pottow, a national bankruptcy expert, said in an interview. “The amount of losses they’re incurring is not something where they can avoid (restructuring).”

Borders employs about 600 workers at its Ann Arbor headquarters.

Borders’ challenges are mounting as the company enters the most difficult time of the year for book store chains: the months after the holiday shopping season.
The company, which lost $74.4 million in its 2010 third quarter, is actively seeking new bank financing and trying to restructure vendor payment agreements to avoid running out of cash.
Borders spokeswoman Mary Davis said in a statement that if Borders can’t find new financing, that "could cause the company to violate the terms of its existing credit agreements in the first calendar quarter of 2011 and the company could experience a liquidity shortfall."
Borders accounted for about 8.7 percent of physical book sales in 2010, down from 11.4 percent in 2006, according to a Goldman Sachs report cited by Reuters.
Investors seem to be losing confidence in the company’s ability to survive without delving into a restructuring of some kind. Borders stock (NYSE: BGP) closed at $0.86 on Wednesday, down 26 percent since the firm acknowledged Dec. 30 that it was delaying payments to some publishers.
Pottow said a Chapter 11 bankruptcy filing would carry benefits for Borders, whose extensive real estate footprint includes more than 500 super stores and annual rent obligations of about $562 million, equal to about one-fifth of total revenue.
“It can get them out of a lot of leases if they want to lose stores faster,” Pottow said.
Jim McTevia, a restructuring expert at Bingham Farms-based McTevia & Associates, said Borders is undoubtedly consulting bankruptcy specialists to prepare for a possible filing. He said it’s possible Borders will land new financing but that it wouldn’t necessarily help the company avoid bankruptcy.
“They could get the new financing and get the refinancing and probably be able to delay an insolvency,” he said. “But on the other hand, in the final analysis, if the company is losing money, nobody is going to put any more money into the company in the form of a loan unless they have bankruptcy court priority protection of a lender.”
Still dangling as a possibility is a prospective merger with rival Barnes & Noble, which top Borders shareholder Bill Ackman of New York hedge fund Pershing Square Capital Management proposed in December. Ackman said he would be willing to help finance a Borders bid to acquire Barnes & Noble at $16 a share.
Analysts have largely expressed skepticism about a possible combination of the two book store companies because of Borders’ poor financial situation and real estate commitments.
But Pottow suggested that if Borders files for bankruptcy, Barnes & Noble might swoop in to pick up the most enticing assets, including inventory and attractive store locations.
Under bankruptcy law, Borders would get six months to propose an exclusive plan for its reorganization, a plan the court would have to approve. Secured creditors would get priority over unsecured creditors, existing stockholders’ equity would likely be wiped out, and the company’s lease footprint would be slashed significantly, experts said.
Possible outcomes of a prospective bankruptcy filing include:
--Borders could successful make cuts to its lease obligations and convince lenders to accept equity in exchange for eliminating debt, finally emerging with a profitable business model.

--The firm could sell off its assets to Barnes & Noble or another player like a private equity firm with a tolerance for a restructuring effort. Under this option, Borders could use the Section 363 provision in the bankruptcy code, a provision that allows the valuable assets to be packaged together so that they can be sold to an outside firm or emerge as a new company. In that scenario, the old assets would stay in bankruptcy and be liquidated. This is what happened during General Motors’ 2009 bankruptcy filing, for example.
“Even if they decide they do want to merge with Barnes and Noble, they still may want to go through a prepackaged bankruptcy to scrub out some of these leases,” Pottow said.
--The company could be forced to convert its Chapter 11 reorganization filing into a Chapter 7 liquidation, which would involve a sale of all of its assets and the death of the company.
Existing stockholders of Borders -- including CEO Bennett LeBow and Ackman -- have a significant interest in helping the company avoid bankruptcy.
“If I’m a major shareholder, I don’t want the company to go through a bankruptcy. I want to avoid it at all costs,” McTevia said. “We saw what happened to the shareholders of General Motors. When they went into bankruptcy court they got blown away.”
One attractive aspect of a bankruptcy filing is that publishers who have stopped shipping books to Borders likely would be forced to resume doing so, Pottow said.
The publishing industry is skittish about the prospect of a major brick-and-mortar chain going out of business.
“If publishers wake up in a world without retailers that are committed to the future of books, they are going to be in serious trouble,” said Michael Norris, an analyst with Maryland-based Simba Information.
Nonetheless, Norris said he doesn’t think a merger between Barnes & Noble and Borders is a good solution.
“There is no circumstance I can think of that would make sense out of it,” he said. “Any kind of combination of these two retailers would do absolutely nothing for the consumer, and I don’t think it would do anything for the shareholders either.”
McTevia said he thinks Barnes & Noble, albeit more financially healthy today, needs to consider acquiring Borders because of the long-term challenges of the industry.
Borders employs about 19,000 workers, including about 600 at its headquarters in Ann Arbor. Barnes & Noble is headquartered in New York.
The destiny for Borders' Ann Arbor employees is decidedly uncertain.
"My experience is when companies strategically merge in bankruptcy, they don't need two headquarters," Pottow said.​

http://www.annarbor.com/business-re...-or-bankruptcy-filing-inevitable-expert-says/

 

This is Tower Records redux. And Borders, to some extent, has been running on fumes for quite a while. They've been slow to pay for a long time now (180+), have been getting supply on supplier credit, generous return policies (sometimes 100%), etc. EXACTLY the same things that were going on at Tower (especially their Classical division) before they threw in the towel.

The suppliers know that it's really really bad news if Borders closes, which is why they've been so generous to them (same as Tower, especially the classical division).

I've always considered Borders to be inferior to B&N, but this is not good. Clearly, B&N will be the last man standing--but for how long?

 

Forrester Research analyst James McQuivey told NPR: "There's always a possibility of a resurrection here, but at this point, it looks like Borders is probably the Tower Records of books. It's probably the book company most likely to go under, and to be that big announcement that causes everyone to finally realize that digital has won the battle."​

http://www.thebookseller.com/news/142468-publishers-losing-confidence-in-borders-survival.html

 

Borders is a dead company walking. The book industry will go into massive turmoil as more and more outlets for book sales dry up once Borders is gone.

 

Revolution is Now

David Wisehart: Your Kindle Tour Guide from the Sun Journal points out just how late is for brick and mortar big-box bookstores—specifically, Borders:

The ebook revolution is happening. The tipping point is here. This Christmas, Amazon sold millions of Kindles. Some say 5 million, others say 8 million. Amazon's not saying. They're too busy counting their cash. Meanwhile, Barnes & Noble sold more ebooks in December than printed books. And Borders, a company that came to the revolution a day late and millions of dollars short, has stopped paying the money it owes to publishers. I don't think it's the end of traditional publishing, but brink-and-mortar bookstores are downsizing fast. If Borders survives 2011, I'll be surprised.​

http://www.sunjournal.com/bplus/story/966054

 

'Round The Bend

From Today's Philadelphia Inquirer:
PAGE-TURNER

By Maria Panaritis
Inquirer Staff Writer

. . . In May 2009, Borders says, it had about 1,000 stores, including those in its Waldenbooks chain. Over the last 14 months, it has shed 200 mall-based Waldenbooks, leaving it with just 507 Borders Superstores and 169 Waldenbooks and Borders Express stores. . .​

http://www.philly.com/inquirer/business/20110109_PAGE-TURNER.html

I did the math, that's the loss of around a quarter/third of their stores within about a year.

 

I agree.

 

As of 9:42 PST, 1/10/11:

Wondering what’s going on with Borders? Us too. It’s been ominously quiet in the several days since our last report, while everyone waited to hear what transpired in meetings between Borders execs and New York’s Big Six publishers. But now, a report by Jim Milliot at Publishers Weekly fills us in — and the news is not great.

Accordng to Milliot,

At last week’s meetings with publishers, some of which included Bennett LeBow, Borders chairman and largest shareholder, it was clear that while publishers want Borders to survive, there are limits on how much support the major houses are able to provide. Borders’s proposal to turn the delayed payments owed to publishers into interest-bearing notes met with a cool reception, and publishers were frustrated that Borders executives couldn’t supply more information….

The lack of specifics and what appears to be a deteriorating situation reportedly prompted one publisher to tell Borders it should go ahead and file for bankruptcy.

In fact, Milliot continues, as a result of the dispiriting meetings, “for the first time the book industry is openly, and in many cases actively, planning for what business will be like without the nation’s second largest bookstore chain.” While publishers wait for a more detailed “turnaround plan” from Borders this week, more and more are coming to support the bankruptcy idea — as Milliot details, “Indeed, there appears to be a growing sentiment that Borders’s best option might be to file for a prepackaged bankruptcy. Such a filing would need creditor and shareholder support, but would be cheaper and quicker than a regular Chapter 11 filing, and it would give Borders the chance to shed unprofitable leases, something Borders is eager to do since expensive leases are one of the retailer’s biggest problems.”

It’s an endgame, if an ugly one. But meanwhile, publishers are rethinking and in some instances cancelling author tours that include events at Borders, while also rethinking print runs for a world with 674 fewer bookstores … which is already two fewer bookstores than we reported last week.​

http://mhpbooks.com/mobylives/?p=26627

 

I doubt e-books are causing this decline. They've only started selling a lot recently - last year or so and Borders has been having problems for awhile.

I think the bigger problem is repayment of debt they took on to expand, people buying online and too much competition for the amount of buyers out there. E-books just kicked them when they were already down.

Eddie

 

The problem for ALL B&M bookstores is really this: The traditional model for a B&M mainsteram bookstore was that bestsellers funded all the operations. That is, you'd sell enough bestsellers to generate profits to sustain the costs of carrying all that slow moving inventory that constitutes 99% of the reason you'd want to visit a B&M bookstore.

Unfortunately, bestseller sales have been stolen by a combination of the big boxes (Costco, Walmart, Target) and the online merchants, who sell them at slim or no profit. You can't make a profit as a B&M bookstore on only deep catalog, and you can't sell your bestsellers at the same price as Costco or Walmart, because those bestsellers are your profit center, not a lure to get people into the store.

THAT'S the real problem. It isn't e-books (not yet). It's not even the expensive leases, although that doesn't help. It's the loss of bestseller sales.

 

I hate to see this for a lot of reasons, including the fact the big publishing companies, small publishing companies, authors, and everyone working for Borders will have to suffer. I have always liked the big bookstores but like music stores, nothing can bring back business to sustain the stores. Maybe if Borders folds, B&N can survive. I know I am part of the problem, just like so many others here, I buy used books, purchase online and rarely buy anything except clearance items or loss leaders at Borders or B&N.

 

This situation can actually be the demise of a small publishing house. It's happened before where a small company was owed tens of thousands of dollars and weren't paid. It would be a shame if this happened and in so many of these cases the smaller creditor get's burnt the most because they need the money the most.

Eddie

 

Various sources give various answers but e-book sales are about 10% of total book sales. High but not really high enough to ruin a business.

You make a valid point and definitely the non traditional book sellers such as Costco and Wallmart have hurt traditional sellers. Many of these places sell books for cost or below cost. How do you compete with that??!!

 

Which raises the question: why are the publishers (who have a clear interest in the survival of the big B&M bookstores) allowing that to happen?

 

They don't have a choice, really. They publishers were very unhappy a year ago when Amazon and WalMart were competing with each other, offering bestsellers for $10/each. But they didn't have much say in it...

 

I think in the past publishers were able to set minimum price or something like that. It was officially sanctioned. But then that was disallowed and the retailers moved in. I can't remember the legal specifics of it or what the whole thing was called but I did read about it in an article about e-books in one of the newspapers.

Eddie

 

Yeah, it's a fuzzy legal area. Nintendo, for example, does not allow the big box retailers to undercut eachother on the price of a Wii (same for Apple and iPods). I've always wondered how they get away with that, but it makes me wonder why can't book publishers do the same. At the very least, they ought to have the power to simply choose not to wholesale their books to places like Costco. While I'm sure Costco and Sam's Club are nice revenue streams for them, it seems awfully shortsighted given the ill effects on "real" bookstores.