Bookseller Borders CEO expects investments in stores, website to bear fruit
DEARBORN, Mich. - Borders Group Inc. chief executive George Jones said Thursday he expects the company's investments developing concept stores and its own website for online selling to start paying off this year.
Despite the possibility that the second-largest U.S. book chain may put itself up for sale, Jones told investors during the Ann Arbor company's annual meeting of shareholders that Borders is moving forward on efforts to improve its business.
"The investments that we've made during the past year ... certainly affected our financial performance in 2007," Jones said. "We feel that this is the year when we'll start reaping some of those benefits."
For the full fiscal year ended Feb. 2, the company reported a loss of US$157.4 million, or $2.68 a share, compared with a loss of $151.3 million, or $2.44, during the previous fiscal year.
The meeting in suburban Detroit came a day after a report in The Wall Street Journal that rival bookseller Barnes & Noble Inc. had assembled a team to study the possibility of acquiring Borders. Barnes & Noble on Thursday confirmed that it put together a management team to study the feasibility.
Jones said Borders has not had substantial discussions regarding a possible sale of the bookseller, and the company's review of strategic alternatives is ongoing. Borders said in March that it may put itself up for sale and that it had lined up $42.5 million in financing to help it continue operations from hedge fund Pershing Square Capital Management LP, its largest shareholder.
"Credit markets are as difficult as they've ever been, for sure. Very hard for even credit-quality companies to raise money," chief financial officer Ed Wilhelm said in response to a shareholder's question related to the financing. "At least they're as difficult at this time as I've ever seen them."
At the meeting, Borders shareholders approved details related to the financing deal and elected its directors.
Jones said in an interview after the meeting that the review of strategic alternatives, which could include the possible sale of all or part of the company, hasn't been a distraction to Borders' efforts to revamp its stores and prepare for the forthcoming launch of the new Borders.com website.
"We think the best thing we can do for shareholders, regardless of what the strategic alternatives might be, is to focus on running our business the best way possible," he said. "And that's what we're trying to do."
Borders shares rose eight cents to $6.99 Thursday, a day after rising 56 cents, or almost nine per cent.
Borders is more than a year into a restructuring that includes rolling out concept U.S. superstores as part of an effort to lure more shoppers and a jump back into online bookselling after seven years paired with Amazon.com Inc. Borders' new website is expected be ready to start taking orders soon.
"You don't get a dollar out of it until you open it up and it goes live," Jones said of the website. "So we're right on the verge being able to reap the benefits of that."
Analysts say a potential combination of Borders and New York-based Barnes & Noble would face numerous obstacles, from the challenge of pairing back a long list of overlapping stores to antitrust concerns from U.S. regulators.
Borders has lost market share both to online retailers and to discounters such as Wal-Mart Stores Inc. amid a difficult economic climate in the United States.
Analysts said the two chains compete in many neighbourhoods across the United States, and consolidating their operations would be complicated at a time when both are fending off competition from wholesale clubs and other discounters.
Any deal between Borders and Barnes & Noble would need to address possible antitrust concerns from U.S. regulators because the two book chains combined control about one-third of the market.
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Borders Group Inc.: http://www.bordersgroupinc.com
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