UPDATE: Borders to Declare Bankruptcy This Week
Update February 16, 2 p.m.: Borders in Brentwood has been spared! But on the slated-to-close list are the stores at Central Plaza in Ballwin, Chesterfield Mall and Mid-Rivers Mall in St. Peters.
image via Is this what lies ahead for Borders?
Along with the Brentwood location, the Borders stores in Sunset Hills, Creve Coeur, Fairview Heights, Edwardsville and South County Center will remain open.
Update February 16, 12:10 p.m.: The Borders Group filed for bankruptcy protection in the U.S. Bankruptcy Court in New York City this morning. The company will release a list of stores it intends to close later this afternoon. (Hold your breath, please, for the Brentwood store, which has one of the finest newsstands in the city.)
In its filing, Borders listed $1.29 billion of debt and $1.27 billion of assets, which doesn't seem so bad (relatively speaking) until you also consider that Borders had lost $143.7 million during the first nine months of 2010 (holiday sales figures aren't yet available) and owes $178.8 million to its vendors and $18.6 million to its landlords, all of whom need the money to stay in business themselves and are probably not so sanguine about letting Borders get off without settling the debts.
In December, Borders stopped paying publishers for the books stores had ordered in during the holiday season. It asked the publishers to accept iou's in lieu of payment, a suggestion the publishers rejected. (Because that's exactly what you want when you're operating with a super-narrow profit margin to begin with.) In the end, the publishers had to write off Borders' orders as a loss. Wiley lost $9 million. Penguin-Putnam, one of the largest publishers, is still owed $41.1 million.
Ingram and Diamond, two of the biggest book distributors, have announced that they will no longer be shipping books and comics to Borders stores. Ingram specializes in books from small publishers, and Diamond works with comics and graphic novels, all of which are essential to a store in competition with Amazon, which delivers everything.
In the past five years, Borders has cut its number of employees by nearly half, from 35,000 to 19,000. With the closings, even more of those stand to lose their jobs.
The Wall Street Journal reported over the weekend that the Ann Arbor-based bookstore chain, which has been in financial trouble for months, is expected to file for Chapter 11 bankruptcy protection today or tomorrow. The Journal also reported that Borders plans to close a third of its 674 Borders and Waldenbooks stores.
"The company will initiate a store closure program," Mary Davis, a Borders spokeswoman, told Daily RFT, "but we haven't released any details. We have not noted locations or numbers." She adds that "when the company has something to discuss, it will do so."
Unlike its big-box rival Barnes & Noble, Borders failed to establish an online presence to fight off the Amazon juggernaut; in fact, Borders transferred all of its online business to Amazon, which was sort of like letting the fox guard the chicken coop. Last December the chain was so short of cash, it was unable to pay its vendors, including Diamond, one of the largest distributors of comics and graphic novels. In response, Diamond has stopped delivering comics to Borders stores.
An unnamed source told the Journal that the bookstore was expected to report more than $1 billion in liabilities once it got to bankruptcy court.