Borders bookseller faces bankruptcy
Faced with stiff competition from online book retailers like Amazon, plus the proliferation of e-books designed for devices like the Amazon Kindle and Apple’s iPad, Borders faces bankruptcy.
Borders Group Inc. is expected to file for bankruptcy early this coming week – the result of declining annual revenues and mounting rent obligations as well as its struggle to catch up to the e-book business that is credited with keeping the publishing industry afloat.
Borders, which is based in Ann Arbor, Mich., is the third largest bookseller in the United States. According to the Wall Street Journal, Borders is turning to Chapter 11 bankruptcy protection after failing to get publishers to agree to a plan that would have restructured a debt that currently totals over $500 million.
The company released a statement on Jan. 27 saying it received a conditional refinancing commitment from GE Capital for $550 million, but the agreement required approval by Borders creditors.
Scheduled to take place either Monday or Tuesday, the bankruptcy will result in nearly 20,000 job losses and the closure of about one third of its 674 Borders and Waldenbooks stores.
The last few years have resulted in declining revenues for the company. Third quarter sales in 2010 reached $470.9 million – a 17.6 percent decrease from the same period the previous year. The company’s operating losses reached $74.4 million, nearly twice as much as the previous year.
In late 2009, the company shuttered 204 bookstores.
The company’s strategy has shifted from hardback and paperback books to e-books and toys. Digital book sales increased 93.5 percent in the third quarter of 2010, and toys and games grew 6.6 percent. But the company accounted for just 8.7 percent of regular book sales in 2010, down from 11.4 percent in 2006.