Borders update

Borders CEO Michael Edwards gave an interview to the Wall Street Journal and the company also had a conference call with creditors, which was covered by Publishers Weekly and Publishers Marketplace. The company will soon decide, based on discussions with landlords, on the fate of an additional 25 to 75 stores that may close. Publishers Marketplace does a good job of putting this into perspective. The 200 stores liquidating now were all drawn from the not quite 500 superstores so it was a full 40% in the initial round, and as few as 145 of those 500 stores were solidly profitable. That is a scary statistic. These articles differ on whether it not there will be a round of closings for the smaller format mall and airport stores.

The company is getting supplied by major suppliers on a cash basis. It is begging for the major publishers to resume shipping on regular terms. Good thing to hope for. Costco will brag in its annual reports that it churns inventory so fast it is often getting paid by its shoppers before having to pay suppliers, Borders has to pay suppliers long before it gets any money from customers. Publishers Marketplace doesn't see why anyone would resume selling on net plus 30 when Borders had a 50% return rate then stopped paying then went bankrupt, but after a point if publishers want to keep a diminished Borders around they will have to take some risks on resuming normal trading terms.

While the company will continue to sell a variety of e-readers in stores it intends to fully invest its marketing and promo efforts in the Kobo. In exchange Kobo will give Borders a piece of all of its US ebook sales. Publishers Marketplace hates this, says selling the same old also-ran eReaders as it has been as it's fallen behind in the business is more of the same old. I disagree. Barnes & Noble isn't going to start selling the Nook at Borders. It can do so at Books a Million because BAM is still a smaller chain with a smaller selection with a much smaller national footprint while large parts of the BN business plan in recent years are driven by gains based on consolidation, I.e., Borders going away. Amazon isn't going to start selling the Kindle at Borders. The only good strategy for Borders is to be the one bookstore chain that offers eReader choice instead of our way or highway. The only choice is selling things that aren't Nook or Kindle. Getting a few pennies on every Kobo ebook sold could be a valuable lifeline to Borders especially as the cash needs of the company will be much smaller moving forward because of the reduced store count and reduced drain on resources from unprofitable locations. Kobo needs the Borders distribution channel, especially with its Australian business now hurting due to the RED Group bankruptcy there. This is an intriguing development, one of the better pieces of news in the Borders Bankruptcy stew.

As in any major bankruptcy that isn't pre-packaged there are disagreements over how much time to give current management to come up with a reorg plan. Creditors want June, Borders as late as August, looming over is when people can plan for holiday ordering. Creditors say the Borders Debtor in Possession financing is both too big for immediate needs thus costing too much in fees while not being big enough to finance Borders thru the holidays. Publishers Marketplace does point out the inconsistency.

Website, Borders says they have lots of visitors but too many of whom leave without buying. Well, they don't offer the level of discounting that BN and Amazon do, they can't afford to necessarily, I don't know how Borders turns this around. And I like the Borders website now.

For a typical 25k sq ft superstore Borders would like to have 15k devoted to books and 10k for other stuff. This doesn't bother me prima facie other than for the implication that it could be yet another round of remodels for a company that has already spent far too much money and energy rarranging the deck chairs. Borders says sales at ongoing stores have surpassed expectations. Publishers Marketplace interpretation: people have been showing up at those stores expecting a fire sale and stay to buy things anyway. There are times I like the added snark and analysis on Publishers Marketplace compared to the offend no one blandness of Publishers Weekly, but today I do not. Yes, Borders is in bankruptcy, has been run like shit, may not survive, but Publishers Marketplace is so snarky on Borders now you get the impression that their stopped clock wouldn't even be right twice each day.