Borders Group

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Borders Group, Inc.
Public
Industry Retail (Specialty)
Fate Liquidation
Founded 1971
Defunct 2011
Headquarters Ann Arbor, Michigan, U.S.
Key people
 Bennett S. LeBow
Former Chairman and CEO
Mike Edwards
Former President
Scott Henry
Former CFO
Products Books, Maps, CDs, DVDs, Calendars, Gift Packs, Magazines, Board games, Encyclopedias
Number of employees
 about 19,500 (2010)
Subsidiaries Waldenbooks

Borders Group, Inc. (former NYSE ticker symbol BGP) was an international book and music retailer based in Ann Arbor, Michigan. The company employed approximately 19,500 throughout the U.S., primarily in its Borders and Waldenbooks stores.

As of January 30, 2010, the company operated 511 Borders superstores in the US. The company also operated 175 stores in the Waldenbooks Specialty Retail segment, including Waldenbooks, Borders Express, Borders airport stores, and Borders Outlet stores.

Borders Group formerly operated stores in Australia, New Zealand and Singapore. However, these were sold off to Pacific Equity Partners (which owned rival Angus & Robertson) in 2008,[1] then were later sold again to REDgroup Retail. The stores continued to operate under the Borders brand as the unaffiliated "Borders Asia Pacific" until RedGroup was placed into voluntary administration in February 2011; with the five New Zealand stores sold to the James Pascoe Group, and the Australian stores gradually shut down, with the last group to close by 17 July 2011.[2][3][4]

On February 16, 2011, Borders applied for Chapter 11 bankruptcy protection and began liquidating 226 of its stores in the United States. Despite a purchase offer from the private-equity firm Najafi Companies, Borders was not able to find a buyer acceptable to its creditors before its July 17 bidding deadline, and therefore began liquidating its remaining 399 retail outlets on July 22, with the last remaining stores closing their doors on Sunday, September 18, 2011.[5] The Chapter 11 case was ultimately converted to Chapter 7.[6] Rival bookseller Barnes & Noble acquired Borders' trademarks and customer list. On October 14, 2011, Borders' former website was replaced by a redirect to Barnes & Noble's site.

History

Downtown Ann Arbor, Michigan, USA, 2005, at the time Borders' flagship store.

The original Borders bookstore was located in Ann Arbor, Michigan, where it was founded in 1971[7] 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 (BIS) (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. Former Hickory Farms president Robert F. DiRomualdo was hired in 1989 to expand the company.[citation needed]

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. 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.[citation needed]

In 1975, they bought out the stock of Wahr's, an 80-year-old bookstore that was ending business at 316 South State, and hired Michael Hildebrand and Harvey James Robin to stock it with rare books and manage the old shop. Hildebrand had managed Gibson's used and rare book department in East Lansing for years and Harvey Robin had been a local restorer of rare books, who moved his bindery upstairs.[citation needed]

Wahr's had been mainly a textbook and school supplies vendor, but the brothers did not deal in textbooks. They moved the retail bookshop to much larger quarters that had become available across State Street, in the former location of the Wagner & Son men's clothing store. The old shop was renamed Charing Cross Bookshop and Tom Frick was sent over from the new bookshop to help.[citation needed]

The chain's flagship store was in downtown Ann Arbor, Michigan at the corner of Liberty and Maynard Streets, in the building once occupied by the defunct Jacobson's Department Store. Although not the original location, it was identified as "Borders #1" because it was the flagship store.[8]

Kmart and Waldenbooks

Borders was acquired in 1992 by Kmart, which had acquired mall-based book chain Waldenbooks eight years earlier in 1984.[9] 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 left the company, leaving behind 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. Facing its own fiscal problems and intense pressure from stockholders, Kmart spun off Borders in a highly structured stock-purchase plan. The newly formed company was initially called Borders-Walden Group and, by the end of the same year, renamed simply Borders Group.[10]

In 1994, Borders briefly operated a mall-based toy store called All Wound Up, which sold toys and novelty items. Most All Wound Up stores were seasonal kiosks in shopping malls.[11]

International expansion

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See also: Borders (UK) and Borders (Asia Pacific)
The former flagship Borders Singapore store.

Borders was slated to open stores in Canada, starting with a 50,000-square-foot (4,600 m2) retail store in Toronto. However, this was rejected for failing to meet Canadian ownership regulations for book retailers.[12]

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.[citation needed]

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. was sold in 2007 to a private equity investor.[citation needed]

On November 26, 2009, Borders (UK) Ltd was placed into administration, which is the equivalent to Chapter 11 bankruptcy protection in the US.[13][14] At that time, the Borders bookshop chain in the UK started a closing down sale in all of its 45 stores.[15] On December 14, Borders UK converted to liquidation (which is equivalent to Chapter 7 in the US) and announced it was going out of business.[16] All UK stores were closed by the end of the year.[17]

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 meter.[18] The highest-grossing location in US territory is a recently remodeled and expanded store in Puerto Rico, it generated $17 million in sales annually.[19]

By the end of 2009, all of Borders directly owned overseas locations had been sold or closed, leaving only the franchise stores in Dubai, Oman and Malaysia.[citation needed]

Franchise stores

A Borders store in Chapel Hill, North Carolina.

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); however, this has since changed with the closure of one level of the store. 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 continued to expand its franchises, adding stores in Malaysia, Oman and Sharjah.[citation needed]

Changes in business plan

In 2003, Borders had 1,249 stores using the Borders and Waldenbooks names.[20]

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

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.[citation needed]

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.[21]

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.[22] However, after changing hands in 2009, Borders in the UK and Ireland went into administration on November 26, 2009. After failing to find a buyer, all the stores were shut on December 22, 2009.

Borders headquarters building, Ann Arbor

In 2008, Borders opened 14 concept stores nationwide, which included a Digital Center, offering select electronic devices such as MP3 players, digital photo frames, and the Sony Reader. The concept stores were located in Ann Arbor, Michigan, Denver, Colorado, Las Vegas, Nevada, Panama City Beach, Florida, Noblesville, Indiana and Alameda, California. The latest Borders Digital Center opened in Alameda, California in January 2008.[23]

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.[24]

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 was a free program with discount coupons and the ability to earn store credit for purchases.[25][26][27][28] In addition, in September 2009, following the lead of Barnes & Noble, the chain discontinued its fee-based wireless service provided by T-Mobile and began implementing a free Wi-Fi network provided by Verizon.[29]

The Australian, New Zealand, and Singaporean stores were sold in June 2008 to Pacific Equity Partners (who also own local competitor Angus & Robertson), which then formed a new company, RedGroup Retail, to pay off debt.[30]

Declining profits

The last time Borders made a profit was 2006. Its yearly income dropped by $1 billion over the next four years.[20]

In March 2007, the company announced the end of its marketing alliance with Amazon, as well as plans to launch their own online business in early 2008.[31]

In March 2008, Borders Group announced the intention to sell the chain because of financial difficulties. There were rumors that Borders Books approached Barnes & Noble in hopes of a buyout. The chain was 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 was said to have a very high interest rate of 12.5%, which meant that the chain would 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 was up almost a point from a low of $0.530 on January 28, 2009.[citation needed]

Also in 2008, Borders signed an agreement with Lulu Press to create "Borders Personal Publishing." Through this, authors could self-publish their work through Borders and its website, and it is all "powered by Lulu."[citation needed]

Borders store interior, San Francisco, California

On January 5, 2009, the company announced that Ron Marshall would take over as chief executive, effective immediately.[32] Former CEO George L. Jones received a severance package of $2.09 million.[32] Mark Bierley was also promoted to chief financial officer, replacing Ed Wilhelm.[33] The changes in management were due to Borders' holiday sales having fallen by 11.7 percent to $868.8 million.[32] On January 13, Mick McGuire, a former partner at Pershing Square, became Chairman of the Board of Directors.[citation needed]

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.[citation needed]

On August 11, 2009, Borders revealed the names of the replacements for five of the eight members of the Board of Directors, who had previously announced their intentions to quit. The new members included Paul J. Brown of Hilton Hotels, Timothy V. Wolf of MillerCoors, and Dan Rose of Facebook.[citation needed]

On November 5, 2009, Borders announced that it would close some of its Waldenbooks stores in an effort to improve the profitability of its Specialty Retail operations. By January 2010, 182 stores had been closed.

Holiday sales figures for 2009 were "disappointing", with total sales of $846.8 million, down 14.7% from the previous year.[34] Employees reported that major cuts were made in payroll hours.[citation needed]

On January 26, 2010, CEO Ron Marshall resigned to become President and CEO of The Great Atlantic & Pacific Tea Co. (A&P), a position which had been vacant since October. Following his announcement, Borders stock fell below one dollar per share. During his tenure at Borders, all of the top executive officers resigned (or were encouraged to leave), including some who had been with the company for over twenty years.[35] Mike Edwards (Vice-President and Chief Merchandising Officer) was appointed interim CEO.[36]

On March 31, 2010, Borders announced that the loan from Pershing Square had been paid in full. In early April, the company's stock had rebounded to $2.78 per share.[citation needed]

On May 21, 2010, it was revealed that Bennett S. LeBow, Chairman of Vector Group, was making a large private investment in Borders stock. As a result, he and Howard Lorber, President and CEO of Vector Group, joined the Board of Directors. Following the resignation of Chairman Mick McGuire, LeBow was immediately elected Chairman of the Board.[37] On June 3, LeBow became CEO of Borders Group. Mike Edwards was confirmed as President of Borders Group and CEO of Borders, Inc., the company's principal subsidiary.[38]

The company reported significant losses for the third quarter, compared to 2009. At the end of 2010, Business Week and BBC News reported that Borders would be delaying its payments to publishers for inventory already received, in order to preserve liquidity.[39] This was prompted by problems in refinancing its credit facilities.

Bankruptcy and liquidation

Borders store closing, Pittsfield Township, Michigan

On February 16, 2011, the company announced that it had filed for Chapter 11 bankruptcy protection, listing $1.275 billion in assets and $1.293 billion in debts in its filing.[40] The company also announced the liquidation and closing of 226 stores.[41] Two private-equity firms, The Gores Group and Najafi Companies, expressed interest in purchasing half of the remaining Borders Group stores.[42][43]

Borders Group announced on July 1, 2011, that it had found a bidder, Direct Brands, that would acquire the assets for $215 million and the assumption of $220 million in debt.[44][45][46][47]

A group of Borders creditors rejected the Direct Brands takeover bid in July 2011.[48] Borders filed for an auction and the motion was approved by a judge;[49] however, the bid deadline expired on July 17 without a bidder.[50] A United States bankruptcy judge approved a petition to liquidate.[51][52] On July 22, 2011, Borders started closing its remaining 399 stores with a phased roll-out.[53][54] Business operations ceased in September 2011.[55] Former rival and the current second-largest chain of bookstores in the United States, Books-A-Million, had made a bid to acquire 30-35 stores and their assets on July 19, 2011, the day liquidation was approved by the courts. The two sides, however, were unable to come to an agreement suitable to all parties.[56][57][58][59][60][61][62]

Office equipment 'For Sale' sign at Borders corporate headquarters

Books-A-Million later resurrected its offer to buy portions of Borders Group, purchasing the leases for 14 stores in primarily New England and Pennsylvania.[63][64][65] Borders USA closed the doors of its final remaining stores on Sunday, September 18, 2011. The last remaining Singaporean Borders store in Parkway Parade Shopping Center, closed its doors at 9pm (Singapore Time) after a final sale on Monday, September 26, 2011.[66][citation needed] However, there are still international Borders stores operating in The United Arab Emirates, Oman and Malaysia. These Borders stores are now under different ownership from the original Borders Group, and were unaffected by their store closures.

The Borders online store closed on September 27, 2011, at 10:30 pm Eastern/9:30 pm Central.[citation needed] A banner then appeared on their website allowing users to browse, but directed them to Barnes & Noble to complete their purchases. All Borders customers had until October 29, 2011, to prevent their personal contact and purchase information from being transferred to Barnes & Noble.[67][citation needed] On October 1, 2011, Borders cardholders were informed by email: "As part of Borders ceasing operations, we Barnes & Noble acquired some of its assets including Borders brand trademarks and their customer list." The federal bankruptcy court approved this sale on September 26, 2011.[citation needed]

The Borders brand in Singapore was purchased by Popular Holdings in late 2012, and had since been reopened in the 2nd half of 2013.[68]

eBook store

On July 7, 2010, Borders opened an eBook store to allow books to be directly downloaded to an e-reader device or a Borders eReader app for the desktop, iPhone, iPad, BlackBerry, or Android.[69] Though branded as Borders's store, it was actually handled by Kobo, Inc.

On June 3, 2011, the Borders eReader apps were changed to Kobo eReader apps and users could transfer their Borders eBooks to their Kobo library.[70]

References

  1. ↑ Borders Reaches Agreement to Sell Australia/New Zealand/Singapore Business to A&R Whitecoulis, Borders.com
  2. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  3. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  4. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  5. ↑ Borders Facebook page with list of store closings
  6. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  7. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  8. ↑ Boarding up Borders. July 24, 2011
  9. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  10. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  11. ↑ http://www.prnewswire.com/news-releases/bordersr-gets-all-wound-up-73888962.html
  12. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  13. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  14. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  15. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  16. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  17. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  18. ↑ "S'pore store is Borders' No. 1", The Straits Times (Life!), 15 November 2006, p. 10
  19. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  20. ↑ 20.0 20.1 Lua error in package.lua at line 80: module 'strict' not found.
  21. ↑ Borders Media Relations
  22. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  23. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  24. ↑ Ripple's high-definition screens heading for borders: company can fine-tune videos to chain's different locations, Los Angeles Business Journal.
  25. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  26. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  27. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  28. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  29. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  30. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  31. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  32. ↑ 32.0 32.1 32.2 Lua error in package.lua at line 80: module 'strict' not found.
  33. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  34. ↑ Corporate News Release, January 18, 2010
  35. ↑ Various corporate news releases throughout 2009
  36. ↑ Corporate News Release, January 26, 2010
  37. ↑ Borders press release, May 21, 2010
  38. ↑ Borders press release, June 3, 2010
  39. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  40. ↑ Borders Bankrupt: Ann Arbor bookstore chain to close nearly 200 stores, AnnArbor.com, February 16, 2010
  41. ↑ Chapter 11 Store Closure List, Borders.com
  42. ↑ "Distressed investor" makes bid for half of Borders, Melville House Publishing, June 2, 2011
  43. ↑ Najafi Cos in discussions to buy Borders, Reuters, June 7, 2011
  44. ↑ Bankrupt Borders Finds a Buyer, Plans to Sell For $215 Million, Atlantic Wire, July 1, 2011
  45. ↑ Borders Picks Najafi Companies as Lead Bidder, New York Times, June 30, 2011
  46. ↑ Direct Brands bids $450M for Borders's assets, Detroit Free Press, July 2, 2011
  47. ↑ Report: Direct Brands to Buy Bankrupt Borders, Wichita Business Journal, July 5, 2011
  48. ↑ Borders Faces Liquidation After Takeover Bid's Rejection, New York Times, July 13, 2011
  49. ↑ Judges approves Borders auction, Boston.com, July 15, 2011,
  50. ↑ Borders Closer to Liquidation; Deadline Passes Without Bidder, International Business Times, July 18, 2011
  51. ↑ Judges approves Borders' liquidation, Detroit News, July 21, 2011
  52. ↑ Borders seeks approval to liquidate, Huffington Post, July 18, 2011
  53. ↑ Borders going-out-of-business sale starts tomorrow, The Boston Globe, July 21, 2011
  54. ↑ It's Official: Borders Is Going Out of Business, Wall Street Journal, July 21, 2011
  55. ↑ Borders seeks bankruptcy court approval to liquidate, shutter all 399 stores, Washington Post, July 18, 2011,
  56. ↑ Books-A-Million Seeks Westward Expansion With Purchase Of 35 Borders Stores, Paid Content, July 21, 2011
  57. ↑ Borders Asks Permission To Sell Stores To Rival, Click On Detroit, July 21, 2011
  58. ↑ Books-A-Million (BAMM) Submits Bid to Acquire Interests in 30 Borders Locations, Street Insider, July 21, 2011
  59. ↑ Borders, Books-A-Million fail to reach deal to save 30 stores, Ann Arbor, July 26, 2011
  60. ↑ Borders Is Really Done, As Books-A-Million Deal Falls Apart, Paid Content, July 26, 2011
  61. ↑ Books-A-Million says talks to buy 30 Borders store leases, assets unsuccessful, Washington Post, July 26, 2011
  62. ↑ Books-A-Million drops bid to buy Borders stores, Baltimore Business Journal, July 26, 2011
  63. ↑ Books-A-Million resurrects offer to buy Borders store, The Suburbanite, August 25, 2011
  64. ↑ Books-A-Million targets 14 Borders locations in Bankruptcy Court deal, The Birmingham News, August 25, 2011
  65. ↑ Books-A-Million wants to buy leases of 14 Borders stores, Detroit News, August 25, 2011
  66. ↑ Borders Facebook page with list of store closings Archived September 4, 2015 at the Wayback Machine
  67. ↑ Barnes & Noble CEO on Borders' demise and future of Borders customers, Entertainment Weekly, October 1, 2011 Archived July 14, 2015 at the Wayback Machine
  68. ↑ Borders bookstore to make comeback in Singapore. Channel NewsAsia (2013-07-31). Retrieved on 2013-09-19.
  69. ↑ Borders Launches eBook Store, BlackBerry and Android Apps, PC Magazine, July 7, 2010
  70. ↑ Borders sale may sell most bookstores in 2-4 weeks, lawyer says, The Detroit News, June 3, 2011

External links

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