Borders Group

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Borders Group, Inc.

Type	Public (NYSE: BGP)
Fate	Administration (Borders UK)
Founded	1971
Headquarters	Ann Arbor, Michigan, U.S.
Key people	Ron Marshall, CEO Mark Bierley, CFO
Industry	Retail (Specialty)
Revenue	▼$3.3 billion USD (2009)[1]
Employees	+27,000 (2009)[1]
Subsidiaries	Borders UK Ltd(17% Stake) Paperchase
Website	www.borders.com (consumer site) www.bordersgroupinc.com(corporate site)

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Borders Group (NYSE: BGP) is an international bookseller based in Ann Arbor, Michigan, United States. Borders is the second-largest bookstore chain in the United States (after Barnes & Noble), selling a wide variety of books, CDs, DVDs, and periodicals, as well as gifts and stationery.

In 2004, Borders reached an agreement with Starbucks subsidiary Seattle's Best Coffee to operate the cafes in its domestic superstores under the Seattle's Best brand name.

In 2008, Borders Group's total revenue was US $3.82 billion, of which $2.63 billion came from Borders Superstores, $2.00 billion from books, $480 million from Waldenbooks Specialty Retail, $622 million from alternative markets, $371 million from music/DVDs, and $284 million from periodicals. ^[2]

As of 2009, there are 517 Borders stores in the United States, and approximately 466 stores in the Waldenbooks Specialty Retail segment, including Waldenbooks, Borders Express, Borders airport stores, and Borders Outlet. During the autumn and winter months, Borders also operates calendar stores and mall kiosks under the Day By Day Calendar Company name.

Contents 1 History 1.1 Beginnings 1.2 Kmart and Waldenbooks 1.3 International expansion 1.4 Franchise stores 1.5 Changes in business plan 1.6 Declining profits 1.7 Bankruptcy 2 References 3 External links

[edit] History

[edit] Beginnings

The original Borders bookstore was located in Ann Arbor, Michigan, where it was founded in 1971^[3] by brothers Tom and Louis Borders during their undergraduate and graduate years at the University of Michigan. The Borders brothers' inventory system tailored each store's offerings to its community. A sister company, Book Inventory Systems (1976-1994), was founded to serve as a wholesaler for and provide the brothers' custom inventory system to regional independent bookstores such as John Rollins, Thackeray's, Schuler Books, and Joseph-Beth Booksellers. Until Borders Superstore expansion occurred in the early 1990s, BIS serviced more independent stores than Borders stores. Former Hickory Farms president Robert F. DiRomualdo was hired in 1989 to expand the company.

The first Borders bookshop, with a meager stock of used books, was located in two rooms above 209 State Street, north of the State Theater; curiously, these rooms' previous renter was one James "Iggy" Osterberg, who went on to become punk rock pioneer Iggy Pop. From there the brothers soon moved, briefly, to a tiny ground floor + mezzanine operation in the Maynard House apartment building, on the southwest corner of William and Maynard Streets. In 1971 they bought out the stock of Wahr's, an 80-year-old bookstore that was ending business at 316 South State, and moved into that location. Wahr's had been mainly a textbook and school supplies vendor, but the brothers did not deal in textbooks. Soon after the move back to State Street, they switched entirely from selling used books to new ones, and then leaped at the chance to occupy much larger quarters that had become available across State Street, in the former location of the Wagner & Son men's clothing store.

The current flagship store is in downtown Ann Arbor, Michigan at the corner of Liberty and Thompson Streets, in the building once occupied by the now defunct Jacobson's Department Store. Although not the original location, it is still identified as "Borders #1."

[edit] Kmart and Waldenbooks

Borders was acquired in 1992 by Kmart, which had acquired mall-based book chain Waldenbooks eight years earlier in 1984. Kmart had struggled with the book division, having first tinkered with the assortment and later with discounting. In the Borders acquisition, Kmart merged the two companies in hopes that the experienced Borders senior management could bail out floundering Waldenbooks^{[citation needed]}. Instead, much of the Borders senior management team fled the company, leaving an even larger and more unwieldy division for Kmart executives to handle, on the heels of aggressive expansions by rivals Barnes & Noble and Crown Books. Giving up on the division entirely in 1995, at the beginnings of its own fiscal problems and under intense pressure from stockholders, Kmart allowed Borders to buy itself out through a highly-structured stock-purchase plan. The newly liberated company was initially called "Borders-Walden Group," but had changed its name to the "Borders Group" by the end of the year.

[edit] International expansion

In 1997, the company established its first international store in Singapore, occupying 32,000 square feet (3,000 m²) in Wheelock Place, Orchard Road, which was then the largest bookstore there. It subsequently opened another 41 stores in the United Kingdom, Ireland, Australia, and New Zealand, and bought 35 Books etc. stores throughout Britain from Philip and Richard Joseph. One of the largest Borders stores in Australia is located at Chadstone, Melbourne. The store boasts a Gloria Jeans cafe, enabling customers to read books for free while they have coffee.

In 1998, Borders (UK) Ltd. was established as a Borders Group subsidiary and with its Borders and Books etc. After quickly becoming one of the country's leading booksellers, due to the fierce competition in the UK marketplace, a number of the Books etc. stores closed, and Borders (UK) Ltd. sold in 2007 to a private equity investor.

On the 26th November 2009, Borders (UK) Ltd was placed into administration, with the fate of all the UK stores uncertain at this time.^[4] The Borders bookshop chain in the UK has started a closing down sale in all of its 45 stores. ^[5]

In the third quarter of 2006, the Singapore store emerged as the best performing among the entire group's 559 outlets, with the highest revenue generated per square foot^[6]. The highest-grossing location in US territory is a recently remodeled and expanded store in Puerto Rico.^{[citation needed]}

[edit] Franchise stores

In April 2005, Borders Group opened its first franchise store with Malaysia's Berjaya Books Sdn. Bhd. in Kuala Lumpur. It is located in Berjaya Times Square, which is the world's biggest mall built in a single phase, with 7,500,000 square feet (700,000 m²). The store in Berjaya Times Square was advertised as being the world's biggest Borders at 60,000 square feet (5,600 m²). Borders' second store in Malaysia is located in The Curve, Mutiara Damansara. The third Borders store opened in Queensbay Mall, Penang on 7 December 2006. Borders opened a franchise store in Mall of the Emirates in Dubai, UAE in October 2006. Despite financial difficulties in the domestic market, Borders has continued to expand its franchises, recently adding stores in Malaysia, Oman and Sharjah.

[edit] Changes in business plan

In March 2007, Borders Group announced it would scale down the number of Waldenbooks outlets it had by half, to about 300, in the next year.

Also in March 2007, Borders Group announced the disposal of its UK and Ireland businesses including its Books etc. Business in the UK, with the aim of revitalizing the core U.S. business; however, it was also announced that Borders Group would retain the Paperchase Stationery Business. International expansion would be likely to continue via franchising. ^[7]

In September 2007 it was announced the UK and Ireland business of 42 Borders Stores and 28 Books etc stores had been sold to private equity group Risk Capital Partners for an initial £20m. ^[8] However after changing hands in 2009, Borders in the UK and Ireland went into administration on 26 November 2009.

Throughout 2007, Borders silently launched a limited test-run of a new concept program. Currently named the Digital Center, this program offers select electronic devices such as MP3 players, digital photo frames, and the Sony Reader. It also offers services such as in-store kiosks for partner websites Ancestry.com and Shutterfly.com, as well as customer CD-burn and download system provided by the Mix & burn company. The Borders Digital Center is currently operating in limited capacity at select locations in Ann Arbor, Michigan, Novi, Michigan, Denver, Colorado, Las Vegas, Nevada, Panama City Beach, Florida, and Noblesville, Indiana. The latest Borders Digital Center opened in Alameda, California in May 2008.^[9]

In late 2007, Borders installed digital video monitors in select stores. The monitors display special programs, as well as news, sports, and financial information provided through Ripple Networks, Inc., a California-based marketing service.^[10]

Borders Group also launched a customer appreciation program called "Borders Rewards." In contrast to a membership from Barnes & Noble, which was a paid-for membership that entitled customers to discounts, Borders Rewards is a free program with discount coupons and the ability to earn cash back on purchases.^{[11][12][13][14][15]} In addition, in September 2009, following the lead of Barnes & Noble's, the chain discontinued its fee-based wireless service provided by T-Mobile, and began implementing a free wifi network provided by Verizon.^[16]

The Australian, New Zealand, and Singaporean stores were sold in June 2008 to A&R Whitcoulls (who also own local competitor Angus & Robertson) to pay off debt.

[edit] Declining profits

In March 2008, Borders Group announced the intention to sell the chain because of financial difficulties. There were rumors that Borders Books approached Barnes and Noble in hopes of a buyout. Currently, the chain is in debt, having increased its financial instability by borrowing $42.5 million USD in March from Pershing Square Capital Management, the company's major stockholder, to keep the company running through the remainder of the fiscal year. The loan is said to have a very high interest rate of 12.5%, which means that the chain will have to post a significant profit to stay afloat in the future. Following the announcement of the loan, Borders' shares dropped 28.6% to $5.07/share. The shares continued to drop throughout the year, and as of December 11, 2009 Borders stocks were trading at $1.30 on the NYSE, which is up almost a point from a low of $0.530 on January 28, 2009.

Later in 2008, the company announced that its marketing alliance with Amazon.com would end (Amazon had been essentially acting as Borders' online component) and subsequently launched its own web sales site.^[17]

Also in 2008, Borders signed an agreement with Lulu Press to create "Borders Personal Publishing." In July of 2009, Borders Group published "Killer of Orchids" by one of their own employees, Ralph Ashworth. Through this, authors can self-publish their work through Borders and its website, and it is all "powered by Lulu."^[18]

On January 5, 2009, the company announced that Ron Marshall would take over as chief executive, effective immediately.^[19] Former CEO George L. Jones received a severance package of $2.09 million.^[19] Mark Bierley was also promoted to chief financial officer, replacing Ed Wilhelm.^[20] The changes in management were due to Borders' holiday sales having fallen by 11.7 percent to $868.8 million.^[19] On January 13, Mick McGuire, a former partner at Pershing Square, became President of the Board of Directors.

On March 30, 2009, Marshall announced that the loan from Pershing Square would be extended for another year (coming due on April 1, 2010), at an interest rate of 9.8%. This, combined with a recent series of layoffs and new promotional deals with major publishers, caused Borders stock to rise. Within a week, it had topped the $1.00 mark. By mid-April it had approached $2.00. As a result, the company canceled plans to ask its shareholders for permission to perform a reverse stock split.

On August 11, Borders revealed the names of the replacements for five of the eight current members of the Board of Directors, who had previously announced their intentions to quit. The new members include Paul J. Brown of Hilton Hotels, Timothy V. Wolf of MillerCoors, and Dan Rose of Facebook.

On November 5, Borders announced that it would close 200 Waldenbooks stores in an effort to improve the profitability of its Specialty Retail operations.

[edit] Bankruptcy

On November 26, 2009, Borders in the UK filed for administration, which is the equivalent to Chapter 11 bankruptcy protection in the US.[1]

Borders is also at risk of filing for bankruptcy and/or going out of business in the US.

[edit] References

[edit] External links

Wikimedia Commons has media related to: Borders Group

• Borders.com
• Official Waldenbooks and Borders Express
• Borders engages in self-censorship
• Paperchase, a Borders Group company
• Borders Analysis on Wikinvest