Can Anything Save This Wreck?

Borders Group (NYSE: BGP  ) could use a dose of deus ex machina at this point in its tragedy. Alas, literary geeks know that trope requires an illogical turn of events to magically solve problems. Increasingly, it looks like even divine intervention couldn't save Borders from its ever-grimmer fate.

The latest blow to Borders? The resignation of CEO Ron Marshall. Known as a turnaround specialist, Marshall is moving on to another job at Great Atlantic & Pacific Tea Co. (NYSE: GAP  ) , perhaps best known for its A&P grocery chain. I guess a diehard Borders fan could try to spin that news positively, arguing that even for CEOs, sometimes a job just doesn't work out. But Marshall has headed Borders for just one measly year. If he's already looking for "greener" turnaround pastures, how much hope is left for the flailing bookseller?

Chief Merchandising Officer Michael Edwards will function as interim CEO until the company finds a replacement -- assuming this kind of management upheaval doesn't manage to scare off any eligible candidates.

At this point, could anyone turn Borders' ship around? The company has already been scuttled by its huge debt load, some four times the amount of its equity. And Borders hasn't earned an operating profit over the last four quarters, meaning it's had to go further into the hole.  

Given the abysmal holiday sales numbers at Borders, it's not too hard to imagine why a CEO might want to move right along. Add up a tough consumer spending climate, the disruptive influence of e-books, and cutthroat competition from the likes of Barnes & Noble (NYSE: BKS  ) , Amazon.com (Nasdaq: AMZN  ) , Wal-Mart Stores (NYSE: WMT  ) , Target (NYSE: TGT  ) , Costco (Nasdaq: COST  ) , and mom-and-pop shops, and even mere survival seems like a big job for Borders.

Just a few days ago, Borders squashed rumors that it had stopped paying small publishers. Sadly, that rumor probably sounded all too plausible to people who have been following this retailer's downward spiral.

Even talented CEOs aren't miracle workers. And while Borders' turnaround is not absolutely impossible, betting on long shots is a bad way to invest. It's just too risky a stock, and it's not hard to believe that the bookseller is destined to fail in 2010.

Costco and Wal-Mart are Motley Fool Inside Value selections. Amazon.com and Costco are Stock Advisor recommendations. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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  • Report this Comment On January 30, 2010, at 8:59 PM, CuriousFwl wrote:

    Wasn't it about this time last year that Motley Fool predicted Borders wouldn't survive 2009?

    And isn't the interim CEO the same guy who pulled JoAnn's (fabric store) beans out of the fire a few years ago?

    And didn't Pershing just extend Borders loan through March 2011?

    Am I wrong on any of that?

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