Embattled Borders Group
Borders did improve its loss from continuing operations to $64.5 million, from $86 million this time last year. However, this "less-bad" news is hardly good news, since it still represents a hefty quarterly loss. Borders' revenue continues to bleed, down 15.8% to $547.2 million in the quarter. Same-store sales in the U.S. dropped 11.4%.
Here's another sinking sensation for investors: Borders' gross margin dropped to 19.9% from 22.4%. And while a recent equity investment from Bennett LeBow improved Borders' liquidity situation, the company is still saddled with plenty of debt; net debt actually increased 5.2%, to $294.7 million.
Borders lost a relatively new CEO recently, but it has gained one piece of ammunition: It's preparing to launch the simple Kobo e-reader, cheaper than those of its major rivals and due out in June. Given that Borders' dangerously sagging sales are being attributed to the shift to digital books, it's good that the company has something to offer its customers in this arena. But will the Kobo be enough?
Its formidable rivals, Amazon.com's
Remember the first time Borders tried pushing e-readers about four years ago? Needless to say, the devices didn't take off with the mainstream until Amazon launched the Kindle. Sony
Borders' stock still warrants a "buyer, beware" warning, as far as I'm concerned. Its first-quarter results gave investors little reason to feel renewed optimism for the long term.
What are the odds of Borders' and the Kobo's long-term survival? Share your thoughts in the comment boxes below.