If anybody needed any additional proof that bookseller Borders Group
Needless to say, this won't go over well with those vendors. The Wall Street Journal has reported that one of Borders' major distributors, Rowman & Littlefield, is temporarily halting shipments to the bookseller in response.
About a month ago, major shareholder Bill Ackman of Pershing Capital brought up the idea that he might help finance an acquisition of Barnes & Noble
The news that Borders is delaying its payments to publishers to fend off a liquidity crunch is a bad, bad sign. Holiday-season sales usually bring cash to retailers; this news implies that Borders didn't fare well in that highly competitive environment. Meanwhile, Borders has already disclosed that it needs to refinance its debt, and it could default this quarter if those negotiations don't work out.
As has been the case for ages, Borders faces competition from Barnes & Noble and Books-a-Million
Borders stock is merely a highly speculative play, and the notion of its eventual and outright failure isn't a stretch of the imagination. Investors should avoid this stock and put their money to work in a company with a far more secure future. The three discounters – Target, Wal-Mart, and Costco – have shown that they know how to navigate a tough economic climate and provide customers with the top bestsellers at rock-bottom prices.
Although Ackman has pulled Borders' bacon out of the fire several times over the course of the company's history, investors should wonder how long he'll consider such efforts worth his while. After all, the current competitive landscape continues to drift toward online stores and e-books, and away from giant bricks-and-mortar booksellers.
What do you think? Sound off on Borders' survival chances in the comments box below.
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Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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