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Borders Loss Widens Dramatically On Charges

The Associated Press

PORTLAND, Ore. (AP) — Bookseller Borders Group Inc. reported Tuesday that its loss widened significantly in its fiscal first quarter due to continued weak sales and more than $70 million in after-tax charges. But results still beat Wall Street expectations, sending shares up 11 percent in aftermarket trading.

The Ann Arbor, Mich.-based company reported a loss of $86 million, or $1.44 per share, for the quarter, which ended May 2. That compares with a loss of $31.7 million, or 53 cents per share, in the same period a year earlier.

Excluding $70.1 million, or $1.17 per share, in charges primarily because of a previously announced finance arrangement with Pershing Square Capital Management, the company lost 27 cents per share.

Borders' first-quarter revenue fell to $650.2 million from $735.8 million a year earlier.

The results topped expectations of analysts polled by Thomson Reuters, who on average expected the company to post a loss of 50 cents per share for the quarter on revenue of $637.3 million. Analyst expectations typically exclude one-time charges.

Borders has struggled for years as shoppers turn to online and discount retailers for books. The problem worsened in the recession as consumers cut back on buying discretionary items like books and music.

Sales at stores open at least a year, considered a key indicator of a retailer's financial health, fell 13.5 percent at Borders superstores and 5.5 percent at Waldenbooks for the quarter.

In the past year, the company slashed jobs, brought in a new CEO and closed stores to buoy itself.

Borders CEO Ron Marshall on Tuesday highlighted the company's lower costs, improved cash flow and debt position, which was down 45 percent, as a result of its aggressive controls. But he said there were still improvements to be made in sales.

"Make no mistake about it, we have much more work to do and will continue to maintain our financial discipline," Marshall said in a statement. "At the same time, we know that we cannot save our way to prosperity. Our long-term success will come from doing a much better job of driving sales, and that's where our focus is right now."

The company will hold a conference call Wednesday to discuss the results.

Shares of Borders closed Tuesday up 26 cents, more than 11 percent, at $2.57 as part of a larger market rally. The shares rose another 28 cents, or nearly 11 percent, to $2.85 in after-hours trading following the report.