Borders Reorganization to Focus on Superstores

PW Daily

In This Issue: Thursday, March 22, 2007
Borders Reorganization to Focus on Superstores
Borders Reports Poor 2006


 
Borders Reorganization to Focus on Superstores
by Jim Milliot

The new strategic plan unveiled by Borders Group this morning will put the focus on its domestic superstore operations by dramatically downsizing both its international operations and the Waldenbooks specialty group. In addition, the company, which has used Amazon.com to handle its online business, will roll out its own online retail operation through Borders.com and will significantly increase its proprietary publishing program. The retailer also plans to make changes to its loyalty customer program, Borders Rewards, to better leverage the 17 million members in the club.

Despite the broad array of changes planned for the company, chairman George Jones said the single most important thing Borders can do to boost its performance is to improve "its blocking and tackling" in its day-to-day operations. "We need a strategy to drive sales," Jones noted. Better and more consistent store execution, improved marketing and merchandising, a change in bonus payments and a shift in corporate culture are among the areas Jones said the company will focus on.

Borders will be developing a new concept store during 2007 and plans to open the first one in early 2008. Few details were available about the new prototype, although it will likely include more technology offerings. Some existing superstores are adding digital centers that will sell audio books and e-books and devices such as MP3 players, and will offer personal publishing opportunities. Superstore stock will be trimmed back. "We have too much inventory in our stores," Jones said. He said improvement in resupplying stores and in e-commerce initiatives should help the company better manage its in-store merchandise. He noted that the new Borders.com Web operation will make it much simpler for customers to pre-order titles using in-store kiosks; orders will be shipped to their homes within two days. Borders will continue to invest in its Seattle's Best Coffee and Paperchase segments and will open several standalone Paperchase stores this year. Borders will scale back the number of superstores it opens in the next couple of years to focus on developing the new prototype and upgrading existing stores. He said he was happy with most superstore locations and envisions closing or moving "less than 10" superstore outlets.

Under its restructuring plan, Borders will close 250 Walden outlets over the next two years, dropping the store count to about 300. It plans to sell its stores in the U.K., Ireland, Australia and New Zealand. It will keep its stores in Puerto Rico and in Singapore, which will serve as the headquarters for its franchise operations. Jones said its franchises in Malaysia and the UAE have done well, and the company sees more opportunities in global franchising. The company expects sales in the international segment to drop to $160 million in 2009, down from $650 million this year.
The company's proprietary publishing program will kickoff in June will a novel by Nick Santora, Slip and Fall; a book by John Legend will be released in July; and a 50th anniversary book on the Grammys is set for October.


 
Borders Reports Poor 2006

The need for change at Borders was evident in its just released financial results, which showed a disappointing end to a disappointing year. Total revenue rose by less than 1% for the year, to $4.11 billion. Writedowns of $186 million resulted in a net loss for the year of $151.3 million compared to earnings of $101 million in 2005.
Superstore sales were up only 1.5%, to $2.75 billion, with comp store sales off 2.2% for the year and down 2.8% in the fourth quarter. Walden sales were off 10.9% in the year, to $663.9 million, with comp sales off 7.5%. International sales rose 12.8%, to $650 million, but same store sales were down 0.4%.



 
PW Religion BookLine from Publishers Weekly
Editors: Lynn Garrett (lgarrett@reedbusiness.com);
Daisy Maryles (dmaryles@reedbusiness.com)
Contributing Editor: Jana Riess
© 2007 Reed Business Information. Published weekly.