Borders reports wider 2nd-quarter loss as revenue continues to drop

Wednesday, September 1, 2010

Borders 2nd-quarter loss widens

NEW YORK — Borders Group Inc. reported a slightly larger loss in the second quarter and said it will sell more items besides books as it readies for the crucial holiday season.

The company is also closing underperforming stores and introducing a paid loyalty program as it continues to battle tough competition from online retailers like and discount stores such as Walmart.

Since financier Bennett LeBow invested $25 million in the company in May and became CEO, Borders has made a variety of moves to shore up its struggling business, including selling its Paperchase stationery unit and introducing an electronic bookstore.

Borders Inc. CEO Mike Edwards said more changes are in the works. Since the beginning of the fiscal year the company has ended seven leases at underperforming stores early, will continue to do so throughout the year.

The company also plans to expand its offerings other than books before the holidays.

“We are increasing our assortment in the high-end stationary and gift items, and expanding other productive non-book categories such as adult games and puzzles, which were a runaway success last holiday,” Edwards said in a call with analysts.

Borders also introduced a paid loyalty program, where members pay $20 a year for access to discounts and free shipping.

Michael Norris said the move is positive, because rivals Barnes & Noble and already offer similar programs.

“It’s the smart thing to do,” Norris said. “Hopefully people who do sign up for it will value their relationship and stick with Borders.”

Loss for the quarter ended July 31 totaled $46.7 million, or 67 cents per share. That compares with a loss of $45.6 million, or 76 cents per share, last year.

Revenue fell 12 percent to $526.1 million from $594.2 million.

Revenue in stores open at least one year fell 6.8 percent. Revenue at stores open at least a year is a key indicator of a retailer’s performance because it excludes growth at stores that open or close during the year. Weakness in trade book sales was offset by strength in the company’s bargain and cafe departments. Revenue from rose 56 percent to $15.5 million.

Borders is focusing on its children’s department and selection of electronic-book readers to drive higher revenue.

In the children’s department, it is expanding its assortment of educational toys and games and will start to sell Build-A-Bear craft kits.

The company lowered its Kobo electronic book reader price by $20 to $129.99 and will also offer the Aluratek Libre eBook Reader Pro for $99. Borders offers six electronic book readers in its stores and plans to expand that before the holidays arrive.

Border’s chief rival Barnes & Noble Inc. last week reported a first-quarter loss, partly because of costs related to a lawsuit and proxy contest with billionaire investor Ron Burkle, who has criticized the way the company is being run. Barnes & Noble has said it is exploring strategic options including putting itself up for sale.

Borders shares fell 4 cents to $1.04.

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