Borders on the brink of bankruptcy as printed book sales plunge

Tuesday, January 4th, 2011 By

borders bankruptcy

Years of declining sales have forced Borders to delay payments to publishers and seek refinanced vendor agreements. Image: CC Maulleigh/Flicker

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 onĀ  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.

Sources

New York Times

Daily Finance

Wall Street Journal

Previous Article

« Largest loan lenders may settle with attorneys general quickly

The nation's largest loan lenders may settle with the probe into "robo signing" by a commission of all 50 state attorneys general. Robot
Next Article

Tax filing deadline extended to April 18, 2011 »

Procrastinators, rejoice; the tax filing season for 2010 has been stretched out by a few days to April 18, 2011, thanks to Emancipation Day. The logo of the Internal Revenue Service.

Leave a Reply

Other recent posts by bryanh

Sugar prices at 30-year high as supplies deplete

The sugar prices 30-year high can be attributed to volatile weather, increased demand for "real" sugar and additional government regulation.
Sugar Cane

How your payroll tax holiday can really mean something this year

Much of the $240 billion payroll tax holiday will be spent on lattes, but discipline can turn yours into real money and savings on interest.
how not to spend payroll tax holiday

Ensure your happy new year with a year-end financial checklist

Before you pop the cork on New Year's Day, find some extra 2010 tax deductions and make your 2011 financial resolutions to have a better year.
financial goals