Borders Group, Inc. recently reported that they filed for Chapter 11 protection. The massive bookstore company also reported they will be closing roughly 30 percent of its stores across the country. The company cited lowered consumer spending and the lack of liquidity as reason for the filing. The filing should permit Borders to reorganize its company. The stores chosen for closing out of the company’s 644 stores will be the under-performing stores.
Borders Group, Inc. is based out of Ann Arbor, Michigan. The company also applied for a more than $500 million loan from GE Capital. This loan will help float the company while it is in bankruptcy. A court must approve the access to the loan, however. The Borders company reported liabilities of 1.29 billion and assets of 1.28 billion. These figures were as of December 25, 2010.
After news of the filing broke, Borders reported on its website that business operations will continue “as normal” and all gift cards will still be honored. In an effort to boost the company’s liquidity, Borders delayed its payments to key creditors, landlords, and vendors.
Bookstores have long struggled as book sales declined, e-book sales grew, and online retailers (like Amazon.com) have stolen much of the live bookstore market. Borders is second only to Barnes and Noble in the bookstore industry, and both companies have struggled in recent years. While Barnes and Noble unleashed its own e-reader, the Nook, the company was previously forced to close all of its B. Dalton Booksellers outlets. Borders has made efforts to keep up with the online book market by launching its own digital bookstore and a restructured customer loyalty program. In the past, Borders has also been forced to cancel or freeze expansion plans. The company had also identified severely under-performing stores for closure.
While the market for “real, live” books will undoubtedly still exist for quite some time yet, things don’t look so great right now for the literacy market (bookstores, publishing companies, newspapers, magazines). Does this signal the end for the brick-and-mortar bookstore (or at least bookstore chains)? Only time will tell.