Wall Street Journal
By Eric Morath
Borders Group Inc. had losses totaling more than $50 million for February and March as it filed for Chapter 11 bankruptcy protection and began closing a third of its stores.
In papers filed Friday with the U.S. Bankruptcy Court in Manhattan, Borders reported a $28.3 million loss for February and a $24.3 million loss for March. Borders filed for Chapter 11 bankruptcy Feb. 16 and began liquidating many of its stores days later.
The financial statements reflect "the impact of our actions, such as the closure of 226 underperforming stores, to position our business for sustainable growth and profitability," Borders Chief Executive Mike Edwards said Monday. "On a month-to-month basis, we are pleased that our cost-reduction initiatives have contributed to reduced losses and these remain a major focus for us."
Borders has closed 200 of the 642 stores it operated when it filed for bankruptcy protection and expects to shut the remaining locations on the closure list by the end of this month.
The losses reported in court papers come on top of the $299 million loss Borders reported on revenue of $2.25 billion for its 2010 fiscal year that ended Jan. 21.
The financial statements filed Friday are part of monthly operating reports Borders is required to file with the bankruptcy court.
Borders, the nation's second-largest brick-and-mortar bookseller, has suffered losses in recent years as it struggled to compete with Internet-only retailers such as Amazon.com Inc. and digital books and e-readers. Those factors and the inability to refinance its debt led Borders to file for Chapter 11 protection.
According to the financial statements filed with the court, revenue in February and March held steady, coming in at $165.5 million and $165.2 million, respectively.
Sales at Borders-run stores fell 28% between February and March as the company shut many locations. A corresponding increase in "other revenue"--mainly amounts paid by liquidators running the store-closing sales--made up the difference.
Last month, financial projections filed with the court showed that Borders expects its annual revenue to fall to $1.5 billion following its emergence from bankruptcy.
The declining sales numbers reflect the smaller number of stores, although Borders executives have promised the company will continue to push into digital books and other growing sectors of the publishing industry.
Mr. Edwards said that in February and March the company showed "improved sales trends in key categories" such as children's products, its Borders Rewards program and online sales.
The financial statements also show that the company's assets and debts are declining as it becomes a smaller retailer.
Borders reported assets of $845.8 million and debts of $1.05 billion as of March 26. In its bankruptcy petition, Borders listed assets of $1.28 billion and liabilities of $1.29 billion as of Dec. 25, 2010.
The Ann Arbor, Mich., company's cash and inventory holdings fell from the end of February to the end of March, but so did its outstanding payroll and borrowing obligations.
