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December 20, 2014

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1 Borders location in Las Vegas will close amid bankruptcy

Borders closure

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.

One Las Vegas store is on Borders' store-closing list. It's at 2323 S. Decatur Blvd.

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

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.

In January, Borders said it was considering a bankruptcy filing after it received a conditional $550 million loan from GE Capital that required it to secure financing elsewhere.

According to the Chapter 11 filing with the U.S. Bankruptcy Court in the Southern District of New York, 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.

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.

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.

"Chapter 11 does not solve any business problems at all," said Jim McTevia, managing partner of turnaround firm McTevia & Associates, in Bingham Farms, Mich. "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."

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

Even as the book industry shifted around it, Borders seemed to be in denial and focused on adding superstores, said Michael Norris, senior trade analyst at Simba Information.

"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," he said.

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.

At its peak in 2003, Borders operated 1,249 stores under the Borders and Waldenbooks names, but 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.

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

The bad news began to pile up December: Borders suffered its ninth consecutive money-losing quarter, a key holiday sales figure fell a dismal 14.6 percent and the company announced it was delaying payments to some vendors to preserve cash.

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."

Sun staff contributed to this report.

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  1. "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."

    Indeed...
    The internets have hit book retailers hard.
    Some of the Borders stores that are closing around the country are the only bookstore in town, making thse closings particularly painful.

    There's always the Public Library, at least in those towns that haven't had to close them due to "the economy"...

  2. When someone Say's "Keeping management stable"
    What? do they mean. Do they mean keeping the run away salaries in check?

    I just Want to know what that means.

  3. "Keeping management stable" means keeping management and when hiring management, that they have experience in book selling. Two things Border's has not been doing. The last two CEO's had no book selling experience.

  4. Now the shoe is on the other foot, they ran all the Mon and pops out of business, putting a store where ever they could, just to shut them down.

    Big business only has one business plan, and that is put up stores to the point that the small guy can no longer compete. Where you used to be able to find just about every magazine there was in some of the smaller book stores, now it's cut a dry if they don't think they can sell two hundred a month you will never find it on their shelves in Borders!

  5. "Bookseller Borders, which helped pioneer superstores that put countless mom-and-pop bookshops out of business"

    Do I detect happiness in AP reporting this story?

    "Now we can only hope someone invents digital coffee so Starbucks goes out of business."

    Great line lampshade!

  6. Mark Thank you.

    samjung I remember that in school I never seen any of my kids bring home these catalogs I guess it went to the way side.

  7. This is not surprising.

    They are a victim of not changing with the times.

    I buy books online. But not through them. I buy them through another website where they look for the book I want at used book stores.

    And they send it to me when it's available.

    Although perhaps a bit slightly used (and, of course, you have to wait for availability just a little bit...not getting it new), it is functional and readable. Once available and subsequently ordered, I get it within anywhere from four to 14 days in the mail (free postage too). And they are very, very trustworthy and reliable.

    When I buy it, it is just about half the price (or even below) of a new book; either hardback, paperback and/or trade back.

    As an example, my last order of nine books that I wanted... All nine of them came to me promptly. And the orders were filled by used book stores in Phoenix, Arizona; Detroit, Michigan; Hartford, Connecticut and St. Louis, Missouri. The cost of handling and postage was free.

    Borders can't compete with that.

    They never try to compete with it neither.

    The new America and the incredible economic downturn times we have now compel people to do what I do. Because it's the smart thing to do. Money is not there to waste anymore. Frugality is the key nowadays. And Borders ain't the way to go.

    Combine that with outlets who make books available through Amazon dot com electronically. The e-pad business is taking off right now and big name book publishers are going with them.

    Borders (as well as Barnes & Noble) will go the way of the hula hoop and Sara Palin soon.

    Just a fad that went past its appeal.

  8. The experience of interacting with a knowledgeable sales staff is being undermined by price and convenience, which can only lead to further narrowcasting in media and more people buying what they know rather than what may challenge them and expose them to new and interesting things. Homogenous, vertical, and boring. Ho hum.

  9. The internet is the greatest thing that has ever happened to books since Gutenberg. Don't lament the passing of Borders. Never have so many books been available at affordable prices to so many people on the plant. Alibris-in Sparks, NV is a prime example of allowing people to sell books to a broader market at extremely competative prices. Amazon also offers millions of books at discounted prices, along with Kindle.

    I never warmed up to the the box store experience. The stock of books was never that impressive and the store spends a lot of space hawking things other than books. The model is obsolete. A nice used bookstore is another matter all together.