Borders Group's (NYSE: BGP ) trainwreck continues. Any investors seeking long-term hope in the bookseller's latest quarterly results were surely disappointed.
In its fiscal second quarter, Borders widened its loss to $51.6 million, or $0.74 per share. Last year at this time, it reported a loss of $0.75 per share.
Borders' total sales sagged 11.5%, to $526.1 million, and same-store sales dropped 6.8%. Online sales increased 56.2%, but only add up to an uninspiring $15.5 million. Gross margin fell to 19.3% of sales from 23%, in part because of the bookseller's drive to provide promotional discounts.
Look out for continued deteriorating profit margins. Capital expenditures surged to $7.7 million from $1.2 million this time last year, as the company focused on developing the Borders eBook Store, among other things.
In addition, Borders is cutting the price of its Kobo e-reader. It really has no choice, since Amazon.com (Nasdaq: AMZN ) , Barnes & Noble (NYSE: BKS ) , and Sony (NYSE: SNE ) recently dropped prices on their own e-readers. These rivals' moves spelled trouble for Borders since Kobo was launched to be the low-frills, low-priced e-reader on the market. Apple's (Nasdaq: AAPL ) iPad is also a major player for the popular, rapidly growing e-book market.
Formidable rivals like Apple and Amazon make this a very difficult competitive climate for Borders and Barnes & Noble, even if folks are rekindling a love for the written word as reading gets "cool" again. Amazon recently announced that the Kindle will be available not only on its website and at retailer Target (NYSE: TGT ) , but also at Staples (Nasdaq: SPLS ) , a move that provides even more bricks-and-mortar competition for Borders in distributing its reader.
Both Borders and Barnes & Noble are horrorshow stock ideas, given the destructive nature of their industry's margin-busting competitive climate. At least consumers get a break: All this competition means that both e-readers and physical books are getting cheaper. Many physical books are now available at places like Borders for less than the e-book versions. That's good for bargain hunters, but bad for Borders and Barnes & Noble long-term.
Investors need to read between the lines, and realize that this story doesn't seem to foreshadow a happy ending for bookseller stocks.
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