Those of you who count Borders as one of your favorite merchants can expect to see a shift in the way the book retailer does business starting very soon.
Armed with a recently-announced $624 million in credit from GE Capital Restructuring Finance, Borders is reshaping its business model to divert attention to five new strategic areas, including a greater focus on e-commerce opportunities.
The financing will primarily be used by Borders to close brick and mortar storefronts that are not profitable and pay off any existing debt to vendors and landlords as part of those closings. The company currently operates more than 19,000 Borders and Waldenbooks stores in the continental United States but it’s unknown just how many of those locations will get the axe as part of the new plan.
“GE Capital is committing to put in place a new senior financing facility for the company,” says Mike Edwards, Borders Group president. “This is an important step for Borders toward implementation of its comprehensive plan to reposition itself as a vibrant national retailer of books and other related products to the consumer.”
With less store fronts to manage, Borders will instead be shifting its focus to a number of other areas that have proved to be more promising recently. Namely, the company is going to continue investing in its 38 million member loyalty club and as well as Borders.com, which can probably expect to see some upgrades and enhancements.
Funding will also be diverted towards pushing the Borders e-reader and library of e-books and an unknown investment will be made in information technology to upgrade customer service offerings. The new plan includes initiatives to reduce supply chain and store operations while offering more merchandise other than just books as well.
The revamping comes at a time when Borders is struggling: the company has yet to release its year-end financial statements and just last month it suspended payments to some of its vendors. According to reports however, total sales through the first three quarters of 2010 were down more than 15 percent, with net losses totaling $185 million and comparable same-store sales down 10.2 percent from the same time period in 2009.
We’re a bit surprised to hear that Borders is struggling as much as it apparently is, especially since the company was still in the top 200 or so of Internet Retailer’s most recent listing of the 500 best e-commerce companies out there. Clearly though, they’re having some problems over there and the leadership feels as though the refinancing option is their best bet for settling with vendors and continuing to serve their customer base.
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