Borders Delays Payments to Gain Time

Borders Group (BGP) may survive its downturn in sales and weak balance sheet -- or it may not. Its latest plan is to buy time by delaying payments to vendors and landlords. But this will work only if those who are owed money by Borders eventually get some -- or all -- of that money back.

Borders says it will postpone January payments to many vendors to conserve cash. It's not clear that the move will do anything more than delay a possible prepackaged bankruptcy or a breakup of the company.

In its announcement, reported in a number of media, the book chain said it "understands the impact of its decision on the affected parties." General Electric's (GE) financial division said it would provide Borders with a $550 million line of credit, but this involves conditions Borders may not be able to comply with.

Book publishers, the lifeblood of the Borders business, could decide to walk away from the bookseller altogether. One reason is that the more inventory they risk, the more write-offs they may face. But the situation is more complex than that and does not work in Borders' favor.

Borders sales are now less than $500 million a quarter and could drop further if more stores are closed as part of a restructuring. By contrast, Barnes & Noble (BKS) quarterly sales are closer to $2 billion a quarter. Publishers may not need Borders sales to keep their own revenue at current levels.

Just as important, as sales of Kindle and Nook e-reader devices grow rapidly, e-book sales have begun to compete with book sales at bricks-and-mortar stores. Borders does not have any real market share in the new business. That may make it expendable.


Increase your money and finance knowledge from home

Income Investing

Grow your nest-egg.

View Course »

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

Add a Comment

*0 / 3000 Character Maximum

43 Comments

Filter by:
mary mac

BORDERS has gone downhill fast, our local store SUCKS, books cannot be found even when there is 7 copies in the store. The staff can not be bothered to help you and the store is a mess. There has always been a big difference between B&N and Borders. B&N is a store for those who love books,the selection is far superior, the employees more knowledgable and the customer is the most important thing. Borders just sells books.

February 01 2011 at 5:02 PM Report abuse rate up rate down Reply
jigokurei

When B&N started charging $20 or $25 membership fees, I never signed up. When Starbucks closed down their shop next door, I dropped B&Ns altogether, and I've been loyal to Borders for nearly nine years now. However, I have noticed a change in the Borders stores over the last two years, and a few of them are starting to look more like a discount book retailer to me; this perceived look has me concerned about Borders real image to consumers. Only this year, 2011, I decided to break down and buy their $20 membership. Now, I can only hope that the the board members can restructor a new and improved image for Borders and retain and gain its earning once again. I would miss then if they go.

February 01 2011 at 3:52 PM Report abuse +1 rate up rate down Reply
morganspend

I LOVE BORDERS! I'm there once a week and have made the cost back on the upgraded membership, leading me to shop more frequently. This seems like a good marketing plan to me. The staff in my local (Noblesville, IN) store has been awesome...from keeping our high school AP English reading lists for local schools to directing me to my next read, I would greatly miss Borders. I've even used the online process now with the free shipping for upgraded members...works great when I don't have time to stop.

Have shopped Barnes & Noble....too expensive, too snooty & inconveniently located. Hang in there Borders ~ we love you!

February 01 2011 at 2:10 PM Report abuse rate up rate down Reply
tdrei53589

They may be "delaying" payments to the big publishers but they stopped paying the little publishers long ago. When Borders goes down they are going to take a lot of little publishers down with them.

February 01 2011 at 1:44 PM Report abuse +1 rate up rate down Reply
pjcmp

Border's "WAS" a good store, then they got caught up trying to save money instead of trying to figure out how to grow their business! Forget about ordering anything online from them...their Suppliers have cut off their Lines of Credit with Borders so they can't even order things for you! Hurry up and use up your Gift Cards...they'll be out of business before you know it!

February 01 2011 at 1:32 PM Report abuse +2 rate up rate down Reply
dbiscuit1

We need Borders patrol Bwhahahahahahahahah

February 01 2011 at 1:28 PM Report abuse -1 rate up rate down Reply
ppaonessa190

The Customer Service at Borders has gotten horrendous! As much as I DON'T like Barnes & Noble, in my town they are the only bookstore left!

February 01 2011 at 1:27 PM Report abuse +3 rate up rate down Reply
Nanette

I want a book in my hand, not an electronic device to read on. I get more out of the book!

February 01 2011 at 1:18 PM Report abuse +6 rate up rate down Reply
frankerin

Given the rapid price rises and book sizes costing up to 20$ for paperbacks, including the so called trade editions, and futile complaints to authors and publishers alike, I have stopped buying paperback books. I now have a kindle and am delighted to download the lower priced novels. This is not Borders fault; it is the greedy publishing houses, which it turns out are subsidiaries of subsidiaries of large houses. Complaints go by way of Jupiter by way of the sun. They never get to anyone who might possibly care.

February 01 2011 at 1:03 PM Report abuse +2 rate up rate down Reply
lily53196

There is no doubt that we live in an electronic age and while I love access to the Internet and can't imagine not having it, it will not replace print material. Sadly many people depend solely on electronic media which limits their access to information, for each has a purpose. In my area the Borders is fantastic, with its enticing displays, easy layout and of course it's coffee shop. I love browsing there and always walk out with more than I planned on purchasing: books to read now, books for "later", gift items, you name it-there's always something. As for Amazon-I hate it. I even have a Kindle and I'm not crazy about it. I use the Kindle occasionally when traveling, but it isn't the same as reading a book. As for purchasing books on Amazon, why pay the charges and wait for delivery? Borders is my favorite and I hope they're able restructure and salvage what has been a great store.

February 01 2011 at 1:01 PM Report abuse rate up rate down Reply