Borders Group Inc. on Tuesday (Nov. 25) reported a widening loss for the third quarter and said it is no longer for sale. Its stock plummeted more than 50 percent in after-hours trading.
The Ann Arbor, Mich.-based bookseller has been in the midst of a turnaround for more than a year, during which it weighed the possible sale of its core business. But company executives said Tuesday that the progress made during that time will allow the company to stand on its own, even in the middle of an economic meltdown.
"We have smiles on our faces," George Jones, chief executive officer of Borders said of the decision to take Borders off the block.
It may still sell its Paperchase Products Ltd. stationery business to Pershing Square Capital Management LP for $65 million but the company also discussing alternative financing with Pershing.
"We were making nice progress before the economic storm began," Jones said. "So basically we are in a mode right now where we are going to batten down the hatches ... .The storm is not going to last forever."
During the restructuring, Borders cut staff, sold some business units, revamped some stores and dramatically lowered its inventory and debt. But like most retailers, it is struggling with vastly lower traffic and sales as consumers limit their spending in the bleak economy. And the company continues to face competition from discounters like Target and online booksellers like Amazon.
Borders reported a net loss of $175.4 million, or $2.90 per share, compared with $161.1 million, or $2.74 per share, in the same quarter of last year. That includes a non-cash charge of more than $133 million for tax and asset impairments.
Revenue dropped to $693.4 million, from $765.2 million in the same quarter last year.
On an operating basis, the company said it lost $39 million, or 64 cents per share, for the quarter, compared with a loss of $42 million, or 71 cents per share, a year earlier.
The results missed Wall Street expectations. Analysts surveyed by Thomson Reuters expected a loss of 50 cents per share, on average, on revenue of $726.5 million for the quarter.
The news came after the regular trading session on Wall Street. Borders shares fell 88 cents, or 52 percent, to 80 cents in after-hours dealings.
The company saw its comparable store sales, a key indicator of a retailer's financial health, drop 12.8 percent at its Borders Superstores and 7.7 percent at Waldenbooks stores.
Borders executives say the company remains in the midst of a financial overhaul and they will continue to focus on ways to strengthen the company internally while larger economic forces are at play.
Among the top issues looming for Borders is the holiday shopping season, which is expected to be one of the toughest on record for retailers.
But company executives were optimistic, saying consumers are likely to turn to books as a cost-effective gift during tight times and that they have the stores prepped with the right stock and promotion for the season.
"We think it's going to be a very competitive holiday," Jones said.