Initial Thoughts on Borders Q3 Results

Nov.26.08 | About: Borders Group, (BGPIQ)

Borders Press Release

First and foremost, the number one problem at Borders (BGP) is its debt. That is falling and has been doing so steadily since the beginning of the year. Second was cash flow / expenses, and those are also going in the right direction. Cash flow is up and Borders will exceed its stated cost saving by 17%.

One has to remember that these results are in the face of a dismal operating environment for all retailers. The really good news is that in spite of it all, Borders is still making progress on its goals. As a shareholder, if the macro environment is lousy one cannot expect management to pull a rabbit out of its hat but as long as the company continues to progress on the stated path, progress is being made.

Two things stick out. Borders.com results fell below expectations and the mentioned "financing transaction" with Pershing. Both need to be listened to on the conference call on Wednesday morning. Off the top of my head, Borders can put Paperchase to Pershing for $65 million but owes Ackman $45 million from the loan earlier in the yearn. My guess is that the company wants to put Paperchase to Pershing and extend the repayment of the loan... just a guess.

Disclosure: Long BGP