bookseller analyst

Borders Turnaround Is Happening Despite Downturn

I agree with Rantall--Borders is all over but the shouting. They have cut inventory--basically eliminating movies and music which represented a large chunk of sales and profits. They have trimmed book inventory tremendously which is why their debt is lower.

You don't have sales if you don't have inventory.

They have also cut payroll by eliminating managers and supervisors which means customer service is suffering.

They are still heavily discounting and as their inventory shrinks this becomes a bigger and bigger problem. Since they discount new titles so heavily, they depend on backlist for profit. If they cut the backlist, where is the profit?

Their only remaining strategy would be to become the best bookstore around. The only way to accomplish that is to INCREASE inventory and INCREASE payroll. That would add to the debt.

So, what is the answer?

I am not really surprised that the street bought into their press releases and spin. The street wants to believe, just as their lackey Todd Sullivan wishes and wished that his BGP investment comes back. I hope he bought at 38 cents. But sell now! The next quarter will be very ugly.