Borders Group (NYSE:BGP) and Barnes & Noble (NYSE:BKS) have both reported their quarterly results. I still don't find either particularly compelling as a stock.

Still lacking in literary genius
In the first quarter, Borders did manage to (slightly) narrow its quarterly loss to $31.7 million, or $0.53 per share, from a loss of $35.9 million, or $0.61 per share, on a GAAP basis. However, Borders' loss from continuing operations widened to $31.7 million from $29.1 million.

Total sales dipped 1% to $784.7 million, and same-store sales at Borders decreased 4.1% and 0.8% at WaldenBooks. In an interesting aside, Borders also chose to break out that its Borders comps would have decreased only 1.7% without music.

Most of us are already aware that the CD side of the music industry is struggling, and I'm not sure what that says to us other than reinforcing that Borders' physical media offerings face many challenges. Books and music are available at different price points and formats at (NASDAQ:AMZN), Apple's (NASDAQ:AAPL) iTunes, Target, Wal-Mart, and Costco (NASDAQ:COST), to name just a few, and a slow economy just makes the scene more difficult for Borders. In its conference call, Borders did mention reducing its music inventory and space dedicated to that niche, and the retailer's music comps decreased a "dramatic" 25.8%.

On a brighter note, though, Borders did say it's managed to decrease its debt by $130.9 million in the quarter; Borders' debt load (which is still formidable) was always an element that gave me one more reason to feel like there are better retail stocks out there to ponder. The company also placed emphasis on having improved its operating cash flow by $132.9 million as it enhanced its inventory management, and it's majorly slashing its capital expenditure plans to $80 million to $85 million this year, compared to $142.7 million in 2007.

Better, but no blockbuster
Barnes & Noble fared a bit better than Borders, but it still illustrated that it's a difficult environment out there. Barnes & Noble widened its net loss to $2.2 million, or $0.04 per share, which included an $8.3 million charge related to its settlement with California regarding the collection of taxes on its website. Last year this time, its net loss was $1.7 million, or $0.03 per share. Excluding the charge this quarter, Barnes & Noble came in at the low end of expectations with earnings of $0.05 per share.

Sales squeaked higher by 1.1% to $1.2 billion, and same-store sales fell by 1.5%. However, speaking of booksellers' websites, its e-commerce site was able to increase comps by 7.2%.

Barnes & Noble was forced to reduce its comps guidance because of the weak retail sales environment as well as its lower-than-expected first-quarter results, although it reaffirmed full-year expectations for earnings of $1.70 to $1.90 per share.

According to Reuters, the bookseller also revealed that it is indeed studying "the feasibility of a transaction" with Borders, but bear in mind that Borders' side of the story is that it's not in "substantive discussions regarding any specific transaction."

Leave these on the shelf
I can't say I'm crazy about either stock, given the difficult competitive environment and a tough economic climate, but I'm even less enamored with Borders.

Borders soared last week on speculation of a deal with Barnes & Noble, but trading on rumors or possibilities often strikes me as one of the most dangerous things an investor can do. After all, look at the long, painful process XM Satellite Radio (NASDAQ:XMSR) and Sirius (NASDAQ:SIRI) have been going through since their proposed merger was first revealed in early 2007. There's just no guarantee such rumors will come to pass (or if they do, that they will happen in a timely manner), and besides, many major mergers and acquisitions result in a deterioration of shareholder value over the long haul. Color me unenthused. 

Meanwhile, it's long been known that Borders was going to ditch as an e-commerce partner and go it alone on the Web, but one can't help wondering whether this is simply too late to make a good entry point. People might argue about whether Amazon's a great stock idea at the moment, but one thing is clear: It is a dominant force in e-commerce. At any rate, Borders has launched its own retail site, marking the first time in seven long years that it's tried its hand at e-commerce on its own.

I've long said investors can find plenty of bargain-priced retail stocks right now, despite the economic turmoil facing consumers. They're out there. However, investors searching for long-term rewards shouldn't put booksellers high on their list.

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