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Pedestrians walk by a Borders Bookstore in San Francisco, California. Borders Group Inc., the nation's second largest bookstore chain, announced today that it will liquidate the company after they failed to find a buyer following a Chapter 11 bankruptcy filing and attempted reorganization in February. Nearly 400 stores will close and an estimated 11,000 jobs will be lost.
Last call is nigh at a bookstore chain that popularized giant selection, cozy chairs, in-house coffee shops and book browsing as a hobby. Borders Bookstores officials announced Monday that they couldn’t find a buyer.
We’ve been through this before. Last year, Ann Arbor-based Borders closed hundreds of stores to try and stave off liquidation. That didn’t work, so at least 15 Southland Borders Bookstores – from Riverside to Mission Viejo to Northridge - will soon close.
In a statement, company officials said reduced consumer spending and its own financial situation made it hard for Borders to stay in competition. During 40 years in business the chain opened more than 1000 stores; at this point, it’s down to 399. About 11,000 people still work at those stores throughout the country. Going out of business sales will begin at some of those stores on Friday.
The move adds Borders to the list of retailers that have failed to adapt to changing consumers' shopping habits and survive the economic downturn, including Circuit City Stores Inc., Blockbuster and Linens 'N Things.
On Thursday, Borders is expected to ask the U.S. Bankruptcy Court of the Southern District of New York at a scheduled hearing to allow it to be sold to liquidators led by Hilco Merchant Resources and Gordon Brothers Group. If the judge approves the move, liquidation sales could start as soon as Friday; the company could go out of business by the end of September.
Borders' attempt to stay in business unraveled quickly last week, after a $215 million "white knight" bid by private-equity firm Najafi Cos. dissolved under objections from creditors and lenders. They argued the chain would be worth more if it liquidated immediately.
"We were all working hard toward a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution, and turbulent economy, have brought us to where we are now," said Borders Group President Mike Edwards in a statement.
Borders liquidation could have far-reaching effects, putting thousands of people out of work at a time of high unemployment, particularly in Michigan where Borders is based. The chain, which has been shrinking in recent years, currently has 10,700 employees.
"We'll want to look closely from the jobs perspective of people in the state," said Geralyn Lasher, spokeswoman for Gov. Rick Snyder, in a statement.
The loss of Borders stores will deal a blow to malls nationwide, according to real estate sources. Borders stores average about 25,000 square feet __ about half the size of a football field __ and a liquidation could leave large empty spaces across the country.
Borders' move to close 228 stores while it reorganized in bankruptcy protection already increased the collective vacancy rate of shopping centers that contained a Borders to 9.3 percent from 4.2 percent, estimated Chris Macke, senior real estate strategist at CoStar Group, the nation's largest provider of real estate data. Macke calculated the liquidation of the rest of the chain could increase the vacancy rate on that same basis to 18.8 percent.
Additionally, Simba Information senior trade analyst Michael Norris predicts the closing could cause sales of electronic books to fall. Borders, for one, entered the electronic book market with Canada's Kobo Inc. last year. Owners of the Kobo e-reader will still be able use Kobo software to buy and read books. And Kobo officials said users of Borders e-book accounts, which began transitioning to Kobo in June, will be able to access their e-books uninterrupted.
"This industry is going to slowly figure out that a lot of e-book readers still use bookstores all the time to discover what's new before heading home to buy it for their e-reading device," he said.
Perhaps a Borders liquidation would hurt the consumer most. Tanya Ellis, 42, of Southfield, Mich., said the closings are "horrible." She said she and a friend would stop at a nearby Starbucks, then visit the Borders store in Beverly Hills, Mich., and browse for about an hour.
"So where are we going to buy books from? I just got into reading books the last two or three years, and they just keep closing all these bookstores," she said, adding that electronic readers aren't an option for her. "It takes all the fun out of it."
Justin Grant, 31, from Brooklyn, however, was less phased. Although he had just picked up a parenting book to read on his commute home Monday, he said he buys most of the 25 to 30 books he reads a year on Amazon.
"It's much easier to get them through the mail and delivered to my desk at work," he said.
It has been a long fall for Borders since Tom and Louis Borders opened their first store in 1971, selling used books in Ann Arbor. At its start, the brothers were mostly interested in offering other bookstores a system they developed for managing inventory.
But in 1973, the store moved to a larger location and shifted its focus to selling new books and expanding, helping pioneer the big-box bookstore concept along with Barnes & Noble Inc. At the time, Waldenbooks and B. Dalton mall chains, with small stores and 20,000 to 50,000 titles, were growing rapidly. The new superstores, by contrast, offered between 100,000 and 200,000 titles, as well as enticements to linger like comfortable chairs and attractive lighting.
Kmart Corp. saw the potential and acquired Borders in 1992, forming a book unit with Waldenbooks. It then spun the bookstores off as a separate company in 1995, the same year Amazon started selling books online.
Borders was slow to adapt to the changing industry and lost book, music and video sales to the Internet and other competition. Sales began to fall, leading to a revolving door of CEOs. By the time Borders' current CEO, financier Bennett LeBow, came aboard in May 2010 after investing $25 million in the company, bankruptcy was already looking like a strong possibility.
Borders filed for bankruptcy protection in February after being hurt by tough competition from online booksellers and discounters. It hoped to successfully emerge from bankruptcy protection by the fall as a smaller and more profitable company, but pressure from creditors and lenders eventually led the chain to put itself up for sale and finally, seek approval to liquidate.
At its peak, in 2003, Borders operated 1,249 Borders and Waldenbooks, but by the time it filed for bankruptcy protection in February that had fallen to 642 stores and 19,500 employees. Since then, Borders has shuttered more stores and laid off thousands.
Borders says it expects to be able to pay vendors for all expenses incurred during the bankruptcy cases.