Borders Warns, Names New CEO

Borders Group ( BGP) sharply widened its second-quarter loss projection Thursday and confirmed that former Saks ( SKS) executive George L. Jones will step in as CEO.

In late trading, the book retailer's shares sank $3.42, or 19%, to $14.86.

Borders said it now expects to report a loss of 28 cents to 32 cents a share for the quarter ending July 29. Its earlier forecast called for a loss of 10 cents to 20 cents a share, while analysts polled by Thomson First Call expected a loss of 17 cents.

The company attributed the worsened forecast to lower-than-expected sales, as well as new charges. Borders will record a $2.3 million pretax charge related to the closure of a distribution facility, as well as $2.7 million in pretax costs related to the retirement of Chairman and CEO Greg Josefowicz.

Josefowicz had said in January that he planned to retire at some point over the next two years. The Wall Street Journal reported earlier this week that Jones, the former CEO of Saks' department store group, would be named to the top spot.

"The Board believes that George will bring innovation and insight to the process of driving long-term growth, which is consistent with the company's current strategic direction," said Borders Director Larry Pollock, who led the CEO search committee, in a statement. "As planned, Greg will stay on in an advisory capacity to assure a smooth leadership transition."

Pollock, a Borders director since 1995, will become chairman.

The new management comes as Borders has experienced competition from rival Barnes & Noble ( BKS) and sharp sales declines in the absence of blockbusters like "Harry Potter" this year. As a result of the new second-quarter projections, Borders said it no longer stands by its full-year earnings forecast of $1.42 to $1.60 a share, which included charges of 8 cents to 12 cents a share. Analysts expect earnings of $1.42 a share, including charges, according to First Call.

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