By Michael S. Rosenwald
Washington Post Staff Writer
Wednesday, February 16, 2011; 11:08 PM
Borders Group, the bookstore chain whose rise helped crush scores of independent booksellers, filed for Chapter 11 bankruptcy reorganization Wednesday, announcing the closing of 200 stores, including eight in the Washington area.
The company, founded in Ann Arbor, Mich., in 1971 by brothers Tom and Louis Borders, is struggling under more than $1 billion in debt amid rapid changes in how Americans buy and read books. In: e-books, downloaded whenever, wherever. Out: People shopping at chain bookstores.
Although expected for weeks, the bankruptcy filing shook shoppers, publishing executives and even competitors.
"This is the biggest bankruptcy in the history of the book business," said Albert Greco, senior researcher at the Institute for Publishing Research in New York. "This is really a depressing day."
As part of its effort to erase debt and emerge from bankruptcy as a viable retailer, Borders said it would close about 30 percent of its 642 stores, including all of its stores in the District and Prince George's County. Thousands of employees will lose their jobs.
According to court filings, the stores expected to close soon include some of the chain's most popular outlets in the region: at White Flint Mall in Kensington, Wisconsin Avenue NW in Friendship Heights and 18th and L streets NW in downtown Washington. In addition, Virginia stores are closing at Tysons Corner, in Winchester and in Stafford County; Maryland stores will be shuttered in Bowie and Largo.
Borders President Mike Edwards said the company "does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term."
Borders said it received $505 million in financing from GE Capital to continue operations during its trip through bankruptcy court. Shares of Borders traded at 23 cents before the filing, and the New York Stock Exchange has started the delisting process.
Across the region Thursday, shoppers at Borders and owners of other stores expressed wonder at how far the chain had fallen.
"It's all just extraordinary. I feel sad for all the good independent bookstores that were put out of business in the process of their expansion and the way they slashed prices," said Barbara Meade, co-owner of Politics and Prose, an independent that has thrived despite being just eight blocks from a Borders in Upper Northwest Washington. "But I also feel bad for the people who are losing their jobs, too. That's very, very sad."
At the Borders at 18th and L, shopper Kevin Marrion said it never crossed his mind that such a prime location would close.
"I work in this building," he said. "I come here every day for coffee and to take a break. I walk around and buy books, magazines, random things to read. It's high-traffic. I've been coming here for so many years."
Even as e-book sales jumped 164 percent last year, for many people, browsing for and buying print books in brick-and-mortar stores remains a cherished endeavor. Reggie Nioys, 38, of Bowie said that when the Largo store closes, more will be lost than just a bookstore. "I was just looking at a father bringing in his son to read a book," he said.
Analysts say rival Barnes & Noble, which has struggled but not nearly as much as Borders, better adapted to the changes in buying behavior. It built its own online business while Borders outsourced online sales to, of all companies, Amazon.com. Barnes & Noble also brought out its own e-reader, the popular Nook. Borders did not, outsourcing its e-book business.
Borders embarked on a costly overseas expansion that distracted it from shifting consumer behavior in its main market. The changes included not just the rise of e-books but also competition from nontraditional booksellers such as Costco and Target. Borders also launched an expensive stock buyback program that rewarded shareholders but left the company low on cash when crisis struck.
On top of all that, Borders changed management at roughly the same pace as books rise and fall on the bestseller list. "This is a company that crashed well before it crashed," Greco said. "You could see this coming for a long time."
Borders has asked a bankruptcy judge in New York to let it begin liquidating inventory at stores this weekend. The company says in court filings that the Presidents' Day holiday would bring in high foot traffic. In liquidations of the 45 stores it closed last year amid mounting financial problems, Borders sold everything it could, even bookshelves and cleaning supplies.
The company said it will continue to honor its reward program and gift cards.
Staff writers Elizabeth Flock and Hamil R. Harris contributed to this report.