Borders in trouble - B&N not much better

I think one of the most frustrating things about what is happening with Borders is how the management of the company has run into the ground. I rarely found what I wanted at the Borders by me and the customer service was virtually nonexistent.

I'd rather shop some place where customer service is an important part of the business.

Sure the competition with the internet played a major role in the downfall of Borders but poor management without vision pushed the company to the brink IMHO.

I saw the same thing at a company I used to work with (Novartis) that also managed due destroy its best resource (its people) to "save" the company--the result was a hollow victory.

One might complain about the customer service at B&N (honestly I've always found it to be quite good) but they always had what I wanted in stock (until recently) and, if they didn't, they would arrange to ship it out to me immediately.

 

Today's specifics, from Craig's Detroit Business shows us how sausage is made:

Having stopped shipments to Borders Group, publisher John Wiley writes off $9 million, doesn't expect payment

By Daniel Duggan

With Borders Group Inc. now into its third month of withholding payments to some landlords and publishers, a New Jersey-based publisher is giving up on getting paid by the bookseller.

Last Friday, John Wiley & Sons Inc. (NYSE: JWA) filed a disclosure stating that it is recording $9 million in bad debt because of nonpayment by Ann Arbor-based Borders.

Wiley based its reporting of bad debt on "the status of our current business relationship with Borders Group Inc. and potential future adverse financial events that may affect this customer," according to the 8K document filed with the U.S. Securities and Exchange Commission.

The $9 million is the difference between Wiley's outstanding receivables with Borders and their "expectation of potential offsets and recoveries in the future and existing reserves for this customer."

Debt of $9 million represents 10 cents a share for Wiley. The company's second-quarter revenue for the period that ended Oct. 31 was $441.8 million.

"No additional charge or bad-debt expense with respect to Borders is anticipated," the company wrote in the statement. "Wiley ceased shipping to Borders in December."

At the end of December, Borders Group (NYSE: BGP) announced it was withholding payments to some suppliers and landlords. Again, on Jan. 31, the company said January payments were being withheld.

Borders is negotiating a line of credit from GE Capital for $550 million to reorganize its debt. But Bloomberg has reported that Borders instead will reorganize in a Chapter 11 bankruptcy filing, which could come as early as this week.

​

http://www.crainsdetroit.com/article/20110208/FREE/110209897

This is the website for John Wiley & Sons, Inc., publisher:

http://www.wiley.com/WileyCDA/

This is important as Borders got a major foothold in textbooks in Puerto Rico, essentially a monopoly. John Wiley & Sons is a major player in the potentially profitable realm of textbooks. Have you priced any college-level Calculus textbooks lately? Scary!

 

The biggest single issue was hiring top level—read ridiculously overcompensated—management from other Big-Box retail establishments who had/have little interest in books or the culture of book lovers. Ever since Borders got picked up by Kmart it's been downhill all the way.

Ironically enough, for all us Hoffmanites, is that putting too much money and space into CDs at Borders may have been a major factor in Borders' decline. It was simply the wrong time to put that much energy into dying formats, sorry.

 

When exactly did Borders put "too much money and space into CDs"? Not recently. Their CD selection has been shrinking for years and is nowhere near as good as Barnes & Noble's selection. In 1998, Borders stores had an amazing selection of CDs. It's a joke by comparison today. A Borders opened near me in 2008, and their CD selection was average at that time. Their selection has been steadily shrinking since.

 

You just answered the question—1998.

 

Today's update comes from the Thought Catalog blog:

Documenting the Fall of Borders Through Its E-Mail Newsletters
FEB. 9, 2011 By LIZ COLVILLE

. . .Borders is, by all accounts, about to shutter for good. Bloomberg reported that the company may be filing for bankruptcy this week. In that report, a spokesperson said the company is “doing everything possible” to “maintain relationships” with the publishers and distributors that stock it; in other words, to stay afloat. There was talk of a merger with Barnes & Noble, which is also foundering, though its stock is worth upwards of $16 a share, versus Borders’ pitiful value, which hovers around 50 cents. Anyway, that deal never happened.

Still, the most forgotten of brick-and-mortar booksellers continues to try to get customers to buy it some more time, and the ways in which is does so are becoming increasingly desperate. Being a subscriber to Borders’ e-mails, the only way to get a hold of those coupons, I’m privy to these attempts and all their overzealous subject lines, which seemed to culminate in a rather startling offer with this morning’s e-mail. In chronological order, here’s a selection of how it’s gone over the past few weeks. These are merely the subject lines of the e-mails:

December 27: WATCH ALL WEEK! 2-Day Deals — Deal #2: 50% off bestsellers
December 31: 50% OFF ANY ITEM! Don’t Miss the Last of Our 2-Day Deals!
January 3: Ring in the New Year with Big Books & BIG SAVINGS!
January 6: $10 in BONUS Borders Bucks — Limited Time Only!
January 6: Eat This, Not That — Shop Here, Not There… And SAVE! [Two e-mails in one day...things are getting serious.]
January 10: 500 Million People Like This [Not Borders, of course — Facebook. This was a Facebook-themed e-mail tied to the release of The Social Network on DVD. Clever.]
January 13: WOW! A Wireless eReader Under $100 — 4 Days Only!
January 20: 4 DAYS LEFT! A Wireless eReader Under $100 [Wasn't that deal over on January 17?]
January 21: Snowed In? SAVE UP TO 46% at Borders.com [Winter-themed e-mails!]
January 24: Don’t Miss the Book BOGO: Buy 1, Get 1 50% Off
January 27: MUAH! Be My Valentine — Gift Ideas & SAVINGS! [Gross, Borders]
January 31: FREE SHIPPING — No Minimum Purchase! Stop Shoveling, Start Shopping!
February 3: Life Is Good with FREE SHIPPING & Ultimate Mochas! [What?]
February 7: Dare to Compare! Kobo Wireless eReader Now $99.99 Every Day! [Oh, so that deal is on for four consecutive days, repeatedly, forever]
February 9: 6 Hand-Selected Wines for $6.99 Each — Plus a Free Gift [?!?!?!]

Recap: at some point in time, Borders’ e-reader offering, the rarely-discussed Kobo, was worth about the same as a Kindle: more than $100, less than $150. In the New Year, and in a telling move, the company reduced the price to $99 for four days, then kept that offer up for another four days, then just gave in, and is keeping the price at $99 indefinitely. Is this enough to save the company? Definitely not. Is it kind of embarrassing, and an example of how the company has ridden the coattails of company (Barnes & Noble) that itself is riding the coattails of another company (Amazon)? Certainly.

And as for that last subject line, it would appear Borders’ person in charge of e-mail marketing is just completely drunk now, and is offering you bottles from his own personal wine cellar in lieu of books. He might be onto something. ​

http://thoughtcatalog.com/2011/documenting-the-fall-of-borders-through-its-email-newsletters/

 

Looks like they will file by tuesday

 

The Fat Lady Has Sung:

Chapter 11 for Borders, New Chapter for Books

By MIKE SPECTOR And JEFFREY A. TRACHTENBERG

Borders Group Inc. is in the final stages of preparing a bankruptcy filing. Kelsey Hubbard talks with the WSJ's Mike Spector about the book retailer's long decline and how they fell behind in the e-reader race and digital space.

The troubled Ann Arbor, Mich., bookseller could file for Chapter 11 bankruptcy-protection as soon as Monday or Tuesday, paving the way for hundreds of store closings and thousands of job losses, said people familiar with the matter.

Borders has abandoned efforts to refinance its debts, and is preparing bankruptcy papers and seeking financing agreements that would keep it operating during the Chapter 11 restructuring process, the people said. Its shares tumbled 33% to 25 cents apiece in 4 p.m. New York Stock Exchange trading after The Wall Street Journal reported its plans.

"Borders is not prepared at this time to report on the course of action it will pursue," Borders said in a statement.

Borders's finances crumbled amid declining interest in bricks-and-mortar booksellers, a broad cultural trend for which it offered no answers. The bookseller suffered a series of management gaffes, piled up unsustainable debts and failed to cultivate a meaningful presence on the Internet or in increasingly popular digital e-readers.

Its online struggles proved critical as consumers became accustomed to getting books mailed to their doorsteps or downloaded to handheld electronic devices. Among Borders's biggest missteps were decisions to transfer its Internet operations to Amazon.com Inc. about a decade ago, and a stock-buyback program coupled with overseas expansion that swelled the company's debt.

Now, Borders is preparing for a costly and time-consuming trip through bankruptcy court, where it will seek to close about a third of its 674 Borders and Waldenbooks stores, the people familiar with the matter said. Borders also would cut swathes of its 19,500 staff as it attempts to reinvent itself to compete with Amazon and its hot-selling Kindle reader, and Barnes & Noble Inc., the nation's largest bookstore chain and maker of the Nook e-reader.


Whether it can restructure and emerge as a stand-alone company is unclear. Many Wall Street bankers and lawyers who have studied the chain believe it may not be able to avoid liquidation. It is expected to report more than $1 billion in liabilities in its bankruptcy petition, said a person familiar with the matter.

Online shopping, and the advent of e-readers, with their promise of any book, any time, anywhere, and cheaper pricing, have shoppers abandoning Borders and Barnes & Nobles bookstores as they did music stores a decade ago.

"I think that there will be a 50% reduction in bricks-and-mortar shelf space for books within five years, and 90% within 10 years," says Mike Shatzkin, chief executive of Idea Logical Co., a New York consulting firm. "Book stores are going away."

In towns and cities across America, consumers will soon have fewer places to discover new books. "I know that there is a lot of buying online, but I like crawling through the stacks and holding a book in my hands," says Jim Nottingham, a business development consultant who lives in Millwood, N.Y., and shops at the Borders store in nearby Mount Kisco. "I feel like Lemony Snicket in 'A Series of Unfortunate Events."'

People familiar with Borders's plans said the company wants to restructure in bankruptcy court with a goal toward remaining a viable business. The terms of Borders' bankruptcy financing are intended to help it avoid the fate of retailers such as Circuit City Stores Inc., which was forced to liquidate after seeking bankruptcy protection during the height of the financial crisis.

Borders is nearing a deal for so-called debtor-in-possession financing, which would keep the company operating in bankruptcy, the people said. The company is hearing pitches from Bank of America Corp. and General Electric Co.'s finance arm for about $450 million in financing, the people said.

Borders also is in talks with lender GA Capital LLC about converting roughly $50 million in Borders' junior debt to bankruptcy financing and contributing about $10 million in new capital, one of these people said. The company is also negotiating with other potential investors about an alternative piece of junior debt financing that would repay Borders's existing junior debt, this person said.

Among the biggest losers in the bankruptcy are shareholders, including financiers Bennett LeBow and William Ackman, whose investments in Borders likely will be wiped out. Messrs. LeBow and Ackman held more than 30% of Borders's stock as of late last year, according to Standard & Poor's Capital IQ. Mr. LeBow, who became CEO of Borders Group last year, invested $25 million last May as Borders tried to rework its finances. Mr. Ackman's Pershing Square Capital Management LP is expected to lose at least $125 million on its investment.

In December, Mr. Ackman surprised the book world by proposing that Borders bid for much bigger rival Barnes & Noble, offering to finance a deal himself. The proposal went nowhere.

Big publishers will also take a hit on books shipped and sold through the holidays. Borders in late December surprised key vendors by suspending payments. Suppliers urged the company to use bankruptcy to fix its problems; few expressed confidence in the bookseller's strategy after negotiations over outstanding debts.

A bankruptcy filing would help Amazon, Barnes & Noble and newer booksellers such as Apple Inc. and Google Inc. grab more customers. Amazon peeled off customers when Borders folded in the U.K. about a year ago. "We expect something similar will happen in the U.S.," said the head of one major publisher.

Borders's travails mark a comedown for a company with modest beginnings that grew to change the bookselling landscape. The retailer traces its roots to 1971, when two brothers, Tom and Louis Borders, opened a small used bookstore in Ann Arbor.

"What made them special was that they were a smaller family-run business," says Neil Van Uum, CEO of Joseph-Beth Booksellers Inc., which filed for Chapter 11 last year. "Smaller companies are closer to their customers than big companies."

In the 1990s, Borders spread across the U.S., part of the book-superstore movement that won shoppers by offering tens of thousands of titles in one location.

But the company didn't anticipate the looming threat of Amazon and changing consumer habits that have pushed physical stores into decline. In April 2001, Borders handed over its unprofitable Internet operations to Amazon. By the time Borders re-launched its own website seven years later, Amazon dominated the thriving online book space, building loyal relationships with millions of customers.

An aggressive stock buyback helped dress up earnings per share. But Borders took on more and more debt to fund the share purchases and its store expansion overseas, boosting total debt to $554 million for the fiscal year ended Feb. 2, 2008, from $159.4 million seven years earlier. During the same period, Barnes & Noble eliminated all its $667 million in debt.

Those dynamics caused Borders's advantages—including a savvy staff of booksellers and a wide assortment of serious tomes—to unravel.

Borders attempted to diversify its stores away from physical books to include features such as kiosks where customers could make their own CDs, download books and music, and explore their family history.

Meantime, Borders was hobbled by store leases that ranged between 15 years and 20 years. That hamstrung its ability to get out of poor locations. A revolving door of chief executives—three in the past two years plus one interim chief—whipsawed it from one business plan to another. Seeing the writing on the wall, publishers cut back shipments.

The bookseller put itself up for sale in March 2008 but failed to find a buyer. "We're small and couldn't take an enormous risk with this company," said Dominique Raccah, publisher of Sourcebooks Inc. "Some months we didn't ship at all."

Borders recently hired turnaround firm AlixPartners and has been talking to bankruptcy advisers from law firm Kasowitz, Benson, Torres & Friedman and investment bank Jefferies & Co. for several weeks.Liquidators are currently bidding to earn the right to close about 200 of Borders' stores, with an option to shutter another 50 or so on similar terms, according to people familiar with the company's plans.

​

From Today's Wall Street Journal.

http://online.wsj.com/article/SB10001424052748704329104576138353865644420.html

 

Borders' selection of music, movies, magazines and books has been awful for the last couple of years. I don't know who even shops there...the one near me has been empty the last couple of times I went in. The whole place was depressing.

 

I've been in several Borders and never saw a kiosk to make your own cd's..

 

People should really not get their hopes up about Borders surviving this bankruptcy as the same entity. Most market analysts believe the company is dead as a doornail in a sinking industry. Their balance sheet is just pathetic.

 

Just because a business, such as Borders, files for Chapter 11 doesn't mean it will survive. I think they are done.

 

It's not just them. It's bookstores, period. My local B&N closed at the end of 2009.

The Borders in my new neighborhood will be the last bookstore I ever go to, I imagine. I'm taking my 40% off coupon there today and buying what may be the last book I buy in person. It'll probably be a cookbook, Jamie's Italy. I don't even look at CDs, there are so few.

 

Based on everything I am reading, Borders has no chance to survive and worse yet several publishing companies are going to take huge hits in the bankruptcy. Stockholders, bondholders and unsecured creditors are not getting much if anything and even the secured creditors are going to be hit hard. Real estate owners subject to the store leases are not in great shape either as many of the locations aren't suitable for any viable business in this economy. Blockbuster is likely going to be liquidated soon as well. I hate to see the change because I am still a frequent shopper at local stores that are going to disappear forever. If Barnes and Noble was profitable and could buy the company for tax loss carryforward, that would be its only value but B&N isn't profitable and may not survive either.

 

Why didn't Borders and B & N get into the video game sales???

that might have brought in some good revenue.

 

B&N once owned the GameStop chain, but spun it off years ago. I suspect the book chain did not see any synergy between the videogame buying demographic (young males) and book customers (middle aged females) to combine them at one place.

 

I got a cd from B&N as a gift that I already have. So I took it back. It clearly has a B&N big sticker on the front, unopened. They said they couldn't help me without a receipt. Not even a disc exchange like I wanted.

I hate Barnes & Noble.

 

Based on information I've read in this thread, Barnes and Noble eliminated thier debt of over 900 million dollars. Operating debt-free, sounds like they're doing OK to me!

 

Might be a fear of taking back shoplifted goods...

 

Ability to use tax loss is based upon a percentage of Borders value....another way of saying that a percentage of nothing equals a benefit of zero.

For B&N the only value of Borders would be with some leases in areas that B&N doesn't have a store. The downtown Boston location where Borders has a two level store is one example.

 

Borders got heavily invested in Manga—even before they arranged to have the shelf space for it. Big sellers for them. Too bad they didn't pay the distributors of all that popular stuff for excitable teens. As for video games, we all know how much good that did for Hollywood Video, right?

 

But why wouldn't a shoplifter just shoplift the cd he wanted in the first place, rather than come back to the scene of the crime?

 

Believe it or not: there are some "GameCrazy's" now operating INDEPENDENTLY of Hollywood Video...

 

Neither have I.

 

Borders and Barnes & Noble more or less fashioned themselves places for sophisticates. Get your scone and latte while you browse for novels and classical music CDs. Yeah, that's an extreme view, but you get the idea. Both stores have kids' sections, but they are focused on learning tools and traditional toys like board games and stuffed animals.

I've always seen Barnes & Noble as being especially stuffy because they focus more on books than movies and music.