Borders (BGP) may have staved off a myriad of troubles thanks to an extension of revolving credit and a recent $25 million equity investment from cigarette company titan Bennett LeBow, but such events didn't come fast enough for the first quarter that ended on May 1. The news is grim for the second-largest bookstore chain in the U.S.

Overall company sales fell 15.4% to $542 million, while operating loss in the first quarter was $33.5 million compared to $29.1 million in the same period a year ago. The loss from continuing operations wasn't as bad as the $86 million reported 12 months before (much attributed to a decrease in warrant expenses), but at $64.5 million it still wasn't that great.

Domestic store sales dropped 16% to $520 million, though same-store sales went down only 11.4% compared to a year ago -- and when multimedia (i.e., dismal DVD sales) were factored out, that decline was only 6.8%. Borders also closed six U.S. bookstores during the first quarter (as part of 214 total store closures, mostly on the mall-based Waldenbooks side over the last year), ending the quarter with a total of 680 locations. As a result, inventory on the company's books also dropped 6.4% to $836 million. Gross margins fell from 22.4% to 19.9% for the first quarter of 2010.

"Our top line remained challenged during the first quarter, yet we were able to soften the impact on our bottom line through continued cost controls," said acting CEO Mike Edwards in a statement. LeBow's investment, "coupled with our recently announced debt financing, strengthens our balance sheet and enables us to continue to aggressively execute a number of key financial and strategic initiatives that will transform the Borders brand. These include improving the store network to increase profitability and productivity and maximizing the digital opportunity, including growing Borders.com."

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