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With $625 million in backing from GE, Borders also restructures.
Borders Group Inc. has a new finance commitment from GE Capital to restructure its business and focus the company more on e-commerce.
Borders, No. 194 in the Internet Retailer Top 500 Guide has secured $625 million in credit from GE Capital Restructuring Finance. The financing will be used to finalize the closing of unprofitable stores and pay vendors and landlords.
Borders, which has 19,500 Borders and Waldenbooks stores in the U.S., hasn’t said how many locations it will close. But with new financing in place to help shore up its financial base, Borders will now concentrate on five new strategic areas, says group president Mike Edwards.
The company will continue to invest in its loyalty club program, which includes 38 million members, grow Borders.com and its electronic book reader and content market share, and make an undisclosed investment in information technology related to customer service. Other parts of Borders’ new business plan are reducing supply chain and store operations and offering more non-book merchandise, although the chain didn’t provide any detail.
“GE Capital is committing to put in place a new senior financing facility for the company,” says Edwards. “This is an important step for Borders toward implementation of its comprehensive plan to reposition itself as a vibrant national retailer of books and other related products to the consumer.”
Borders continues to concentrate on growing its e-commerce business even as it loses money and struggles to pay vendors. Last summer Borders rolled out a new electronic books store with 1.5 million titles, including thousands of free titles. The books come in a variety of formats, including digital and PDF files, the retailer says.
Borders also offered its loyalty program members multiple incentives to shop at the e-books store, including gift cards, double loyalty club dollars, also known as Borders Bucks, and exclusive offers on select digital titles.
But Borders also is struggling financially. Last month the company suspended payments to certain vendors. Borders has yet to report year-end financials.
For the first three quarters ended Oct. 30, the company reported:
- Borders.com sales were $43.3 million, a 24% increase from $34.9 million year over year. The company attributes web sales growth to improvements to its web site features and functions.
- Total sales of $1.51 billion, down by about 15.2% from $1.78 billion.
- Comparable-store sales declined by 10.2%.
- Net loss was $185.2 million, compared with a net loss of $169.3 million.
“Borders is doing everything possible to maintain its long-term and valued relationships with our vendors and publishers, which are in the best interests of serving our combined customers,” says Edwards. “We view the refinancing route as the most practical, efficient and beneficial to all parties, and we are working with our vendors in this regard.”