After the markets closed yesterday, bookseller Borders Group, Inc. (BGP) announced its fourth quarter 2009 and full year earnings. The company reported EPS of $0.91 for the quarter on revenue of $946.5 million. Earnings were double the same period a year ago, while revenues were 13% lower. Same-store sales were off 14% at Borders stores and 8.5% at the group’s Waldenbooks stores.
For the full year, Borders’ EPS improved to a loss of -$1.83, compared with an EPS loss of -$3.07 in 2008. Income from continuing operations also improved, from a loss of -$184.7 million a year ago to a loss of $110.2 million in 2009.
What really saved the day for Borders was its announcement that it had repaid a $42.5 million loan from investor William Ackman’s Pershing Square investment firm. The loan had been extended three times and was due tomorrow, with no further extensions possible. Had Borders not made the payment, it could easily have had a ‘going concern’ issue.
Bank of America (BAC), Wells Fargo (WFC), JP Morgan Chase (JPM
), and General Electric‘s (GE) GE Capital Markets Inc. have backed a new $700 million senior secured credit facility for Borders which will mature in March 2014. Borders also closed a $90 million term credit facility, of which all but $10 million is also due in March 2014. The $10 million is due in December 2010.
Borders CEO Ron Marshall left the company in January to become CEO of Great Atlantic & Pacific Tea Co. (GAP). Marshall had replaced fired CEO George Jones only a year earlier, but Borders failed to perform well during the 2009 holiday season, when sales dropped 13.7% compared with 2008. Interim CEO Mike Edwards was EVP and chief marketing officer for the company, and his charge is to boost the top line at Borders.
Top-line growth will be no easy thing for Borders, which is closing both Borders and Waldenbooks stores in an effort to conserve cash. In December Borders signed an agreement with Kobo, Inc., a Toronto-based provider of electronic books to create a new eBook store integrated into borders.com using the Kobo engine, which is device-agnostic. Borders gets to book the sales from the new eBook stores. The new online store is set to launch in the second quarter of 2010.
That may be too late to make much difference though. A blizzard of e-books and formats and readers will have beaten Borders to the punch. An underfunded and inexperienced new entry into the ebooks market is not likely to make much of a splash, unless it practically gives its product away. And that won’t grow Borders’ top line.
Shares are up more than 40% this morning. That shouldn’t last too long.
