After just a year on the job, Borders (BGP) CEO Ron Marshall is leaving the company to become CEO of the supermarket chain A&P, according to The Wall Street Journal. The news comes just one day after the book retailer posted dismal holiday earnings, a few days after fending off reports that it was delaying payments to small publishers, and with up to 15% of Borders' workforce facing layoffs later this week.Marshall's departure is effective immediately and Mike Edwards, who had been Borders' Chief Merchandising Officer since September, has been named interim CEO, reporting to Board Chairman Mick McGuire. In addition, the company's Board of Directors has retained Korn/Ferry International to lead the search for a permanent CEO, which indicates Marshall's departure comes as something of a surprise.
"Borders appreciates Ron's contributions during his tenure with the company," said McGuire in the accompanying statement, pointing to "substantial operational and financial improvements" in cashflow, debt reduction and new growth opportunities, adding that "Mike Edwards is the right person to take on this responsibility at this time given his experiences as a CEO and proven track record of successfully repositioning and growing specialty retail businesses."
The news does come with a few added wrinkles. In an internal memo to employees after the holiday sales earnings were announced, Marshall said "we have some difficult changes to make in the days and weeks ahead within our organization. There is no way around it--without increasing sales, we are forced to continue to adjust our cost structure to allow our company to operate as we go about transforming the organization."
Bearing this gloomy sentiment out, sources tell DailyFinance that Borders will lay off between 10-15% of its workforce on Thursday, though the specifics have yet to be confirmed. When reached for comment, Borders spokesperson Mary Davis said "We cannot rule out job eliminations, but I cannot confirm what you have below, and have nothing to share specifically today."
Marshall's new employer, has some ties to Borders' main book retailing competitor, Barnes & Noble (BKS). Both A&P and B&N share two common shareholders, Ron Burkle's Yucaipa Cos. and Aletheia Research & Management, and their relationship is complex and intriguing. Together they have been instrumental in restructuring A&P's marketing strategy, and also account for the largest minority stake in B&N, which may get around the "poison pill" arrangement that stalled Burkle's massive stock binge late last fall.
Is the hiring of Marshall a timely coincidence, or part of a larger plan which may involve B&N? Based on B&N's current stock market performance today - up as much as 17% from yesterday's closing price of $17.38 a share, and currently hovering around the 12-13% range - the latter seems almost as strong a bet as earlier news that B&N may be supplying its e-bookstore for Apple's forthcoming tablet. No doubt shareholders for both B&N and A&P - as well as for Borders - will be paying attention to these two partnered private equity companies in the months to come.
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