Just my luck. A week after Borders Group (NYSE:BGP) disappoints investors with a wider-than-expected fiscal first-quarter loss, I get to sing the company's praises.

No problem. Oh, I know the company's shortcomings:

  • Earnings have fallen for two straight years, and same-store sales growth has been stagnant.
  • Operating losses struck the company's international and Waldenbooks subsidiaries last year.
  • The Book Industry Study Group expects book sales to rise at a 3% annualized clip over the next five years.
  • Next month's release of the final book in the Harry Potter series will create a void in event-driven publishing.
  • Amazon.com (NASDAQ:AMZN) is winning market share with low prices and aggressive free shipping campaigns.
  • On the music side, CD sales have fallen dramatically on this side of the millennium.

The only aspect of the Borders experience that seems to be riding a booming trend is its cozy premium coffee and baked treats business, yet that's going to suffer if traffic starts to dwindle.

Again, this isn't a problem. No sweat, my fellow bookworms. The company's on it, with a fresh CEO who hasn't spent more than a year at the helm but is already taking the right steps to bring back Borders.

Scaling back on unsuccessful small-box mall locations and lackluster overseas markets, Borders is emphasizing its healthier superstore concept. It's also moving ahead with its successful franchising efforts in kinder international markets like Singapore, Malaysia, and the United Arab Emirates.

The end result won't be immediate. The pros expect another bottom-line dip this year. However, all seven major analysts following the company expect earnings to improve dramatically next year. It will get even better after that for this promising Motley Fool Inside Value turnaround pick.

Why should you believe in Borders at this point? I thought you'd never ask me to ask on your behalf.

  • Borders reaches 30 million customers a year -- 30 million well-read customers.
  • There are 17 million members of the company's Borders Rewards incentive program -- 17 million well-read members.
  • Fifteen million willing recipients have opted in for the company's weekly promotional email -- 15 million well-read recipients.

I am stressing the "well-read" aspect of the retailer's clientele because that's important. The company's various inroads into this desirable demographics group are going to serve it well in the future.

Hey, books aren't going away. Google (NASDAQ:GOOG) and Amazon want to digitize them, but have you ever heard about folks digitally pirating books the way music and video have been raided? Of course not. I don't think anyone will ever say "I'm off to curl up with my Sony (NYSE:SNE) Reader" anytime soon.

There may be other leisure-time magnets bubbling, but Borders is doing its part to matter. In association with Gather.com, Borders helped carve out an online community of book lovers on the popular social networking site earlier this year. The company is also in the process of taking back the reins of its online store from Amazon.

The cyberspace initiatives are encouraging, though obviously Borders can't bounce back if its stores aren't buzzing again. That is where growth initiatives like the Paperchase stationery shops within Borders superstores come into play. The CEO's vision includes other "destination businesses" that emphasize geographical differences between stores, as well as stocking its racks with high-margin proprietary and exclusive releases.

Digital center makeovers are also in the works, just in case e-books, digital audiobooks, and portable players carve out a piece of the book consumption market in the future.

These may all sound like common-sense tactics, but it took an outsider to have the kind of clarity that Borders needs at this point. CEO George Jones headed up the Saks (NYSE:SKS) department store chain before taking over at Borders last summer.

If my bullish case is light on numbers, it's because I will concede the math to the bearish David this week. The financials don't look pretty right now. Even next year's targets are lame, as it's merely the launching pad. However, Borders is selling for just 12 times what it earned three years ago. It won't be long before a smarter, leaner, and futuristically diversified Borders laps its past. That will be awfully pretty for investors who can sync up with the future by owning Borders -- on the cheap -- at the present.

You're not done yet! If you missed the bear's argument, it's here. If you've already read everything, cast your vote for the winner here.

Borders is an Inside Value pick. Amazon.com has been recommended to Stock Advisor subscribers. Plan now for the future with a 30-day free trial subscription to either newsletter.

Longtime Fool contributor Rick Munarriz loves reading so much that he married an English teacher. OK, so maybe she wasn't teaching English when they first met. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.