bookseller analyst

Borders: Interview with CEO George Jones

My disclosure: I worked at Borders fro Nov. 2006 to April 2008 when my supervisor position was eliminated. I hav worked for one other chain and two large independents.

I an say that Borders management is very out of touch with the real world. All investors have to do is read Borders last quarter press release. They will see it is pure fiction. Borders had what looked like a better quarter because it included the sale of its Australian stores as well as sharp cuts in inventory and payroll.

Borders has cut their inventory sharply in part to reduce their debt. They essentially have eliminated CD sales, only carrying top list titles. Likewise, DVD inventory has been cut sharply and book inventory was cut about 25%.

With Christmas approaching Borders is filling shelves again. That will again increase their debt. Their market cap is around $250 million and their debt is around $500 million.

They have cut hours in their stores so much they essentially have no customer service. While I worked there, payroll hours were low and they are significantly lower now.

George Jones talks about Borders commitment to the Sony Reader but that is a joke. No one is really trained in selling it and it is definitely not a promotional item. At $300 a pop you would think Borders would give its employees an incentive to sell it. It literally was thrown into the stores.

This company has no vision and no strategy. The concept stores basically change Borders to a Target style from whence George Jones came. You can't run a store like that with low payroll.

Both Borders and Barnes and Noble (and WalMart, Costco, etc.) don't realize is bookselling, more than any other retail reflects local taste. It's not just a local section, it's tailoring the store to local needs and employing people who know the merchandise.

If there is someone out there who understands book retailing on a local and national basis, who understands how to manage payroll and hire competent managers and employees, then Borders could be a bargain...But if a Wall Street type buys it---they better change their thinkig radically or their investment would be a waste.

My handicapping suggests the Borders name will be gone by February.