Borders files bankruptcy as job, expense cuts don't stem losses
Wednesday, February 16, 2011; 7:03 AM
Borders Group Inc., the number two U.S. bookstore chain, filed for bankruptcy in New York today after management changes, job cuts and debt restructuring failed to make up for sagging book sales in the face of competition from Amazon.com Inc. and Wal-Mart Stores Inc.
The 40-year-old chain, whose market value shrunk by more than $3 billion since 1998, racked up losses by failing to adapt to shifts in how consumers shop. Borders's first e-commerce site debuted in 2008, more than a decade after Amazon.com revolutionized publishing with online sales. The world's largest online retailer beat it again by moving into digital books with the Kindle reader in 2007, a market Borders entered in July.
"Instead of leading and being innovative, they were certainly a follower," said Michael Souers, an analyst for Standard & Poor's in New York.
Borders, based in Ann Arbor, Michigan, faced decreased consumer spending since its last annual profit in 2006. It began looking for cash in December after disclosing that lenders cut its borrowing capacity and that failure to find replacement credit could lead to a violation of its loan agreements and a "liquidity shortfall" in the first quarter of 2011.
In its filing U.S. Bankruptcy Court in Manhattan, the company listed debt of $1.29 billion and assets of $1.28 billion.
The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York.