Borders, the national book chain, has been feeling the pinch of the new digital paradigm. As book sales have fallen, Borders has been losing money for years. The brick and mortar book retailer appeared to be on the brink of extinction as it delayed payments to publishers last week.
Borders pleas to publishers for a reprieve
Borders Books’ potential bankruptcy has alarmed publishing houses. Borders executives will meet with publishers this week in an attempt to preserve the relationship. In an especially dismal third-quarter-earnings report on Dec. 30, the bookseller reported a $74 million net operating loss, a sharp dive in year-over-year sales and an urgent need to restructure vendor financing agreements. On Dec. 30, Borders’ stock plunged from $1.16 to 96 cents, putting the company on the verge of getting delisted from the New York Stock Exchange. On Monday, two top Borders executives resigned.
What a Borders bankruptcy means for publishers
Publishing houses have a lot to lose if Borders is unable to recover. The company represents about 10 percent of the overall book trade. Should Borders go under, publishers would kiss tens of millions of dollars goodbye and lose acres of precious merchandising space at more than 675 Borders locations. A Borders spokesperson told the New York Times that the company had not yet entered a liquidity crisis. Borders stores across the country are still well-stocked. But holiday shopping traffic crashed its website when it was needed most. Plus, a year-end practice of returning unsold inventory to publishers for full credit was discontinued to keep books on shelves as publishers consider halting shipments.
A Borders bankruptcy in 2011
One Borders book distributor has already pulled the plug. When Borders announced a delay in payments to publishers, Rowman & Littlefield Publishing Group Inc. stopped shipping books through its National Book Network. Other publishers are mulling over whether to follow suit. A publishing executive told the Wall Street Journal that in this week’s meeting, Borders could ask companies who haven’t been paid to consider converting part of those payments to debt. But unless new investors and strategies right the ship, a Borders bankruptcy in 2011 appears inevitable.