It's not really shocking that long-struggling Borders Group (NYSE: BGP ) has decided to replace CEO George Jones; the retailer's holiday sales were awfully disappointing.
Borders' total sales for the nine-week holiday period ended Jan. 3 fell 11.7%. Comparable-store sales plunged 14.4%. I stopped at a Borders after Christmas and found the atmosphere grim, with many, many markdowns. That was an anecdotal observation, of course, but given the way this company's been going, none of this surprises me.
Jones will be replaced by Ron Marshall, who most recently worked for a private equity fund he founded, Wildridge Capital Management. The press release said the replacement is "to more aggressively drive a turnaround of the company within today's challenging economy." Marshall's background also includes "senior management positions" at Crown Books (which is long gone) and Barnes & Noble's (NYSE: BKS ) college bookstores.
In addition, Borders made major changes to its management team: CFO and Executive Vice President Ed Wilhelm was replaced by Mark Bierley; Anne Kubek became executive vice president, merchandising and marketing, in place of Rob Gruen; and Dan Smith was named to his new position as chief administrative officer.
The press release acknowledged the continued need to strengthen Borders' balance sheet, which is sorely needed. Given its high levels of debt, it was among a few retailers we may have to kiss goodbye.
Jones joined as CEO in July 2006, and a glance at Borders' chart gives one illustration of just how lackluster his tenure has been. At that time, shares hovered in the upper teens; today the price is well below a buck. Of course, stock moves don't always match up with how a company's doing operationally, especially in these pessimistic times when many stocks are being brutalized, but in this case the beaten-down price is very justified. The retailer hasn't posted an annual profit since the year ended January 2006, and the rotten economy will make it even harder to keep things going.
I have never been fond of Borders as a stock idea, even as the price plunged. It faces far too much competition; best-sellers are available at discount stores like Wal-Mart (NYSE: WMT ) , Target (NYSE: TGT ) , and Costco (Nasdaq: COST ) , not to mention Barnes & Noble and Books-A-Million (Nasdaq: BAMM ) , and to my way of thinking, the real major threat is online powerhouse Amazon.com (Nasdaq: AMZN ) .
A new CEO may be nice; I guess it's better than the company saying it's not doing anything to try to bail out this long-sinking ship. Then again, I think investors who buy into Borders now -- even with a share price below the $0.50 mark -- should consider the idea that they are being very speculative. Borders has a lot of major problems to solve, not least of which is a lot of debt in a dismal economic climate, and I continue to believe it's too late for a happy ending, new CEO or not.
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