Thursday, January 21, 2010

Borders is hurting, and holding back payments to smaller publishers

At the end of 2009, the British Borders bookstore chain went bust. That business was founded by the American Borders company, but it is no longer connected. However, they do share an important problem -- sales are off and it's difficult to pay bills.

Borders is also later than chief bricks-and-mortar competitor Barnes & Noble in offering an eBook reader. All bricks-and-mortar booksellers face increased online competition, particularly from; and physical big-box retailers such as Walmart and Target are increasing their book business.

Borders shut its 200-store Waldenbooks chain last year. Borders' sales for the quarter ending on October 31 were nearly $100 million less than the comparable period in 2008. They lost about $34 million in the quarter -- about $10 million worse than a year earlier.

For the 11-week holiday period ending on January 16, 2010, sales droppd about 15%. Barnes & Noble reported similar trouble for the holiday season in its physical stores, but online sales were up.

The Financial Times reported that "management is playing a risky game of favorites by only paying some of the publishers it trades with, according to six suppliers interviewed by Debtwire. The company is paying its largest vendors in timely fashion but is in growing arrears to a number of smaller publishing houses, some of whom are preparing to take legal action."

"A group of publishers supplying Borders have retained the bankruptcy group of Lowenstein Sandler as legal counsel concerning mounting receivables from the nation’s second biggest bookseller, said two sources familiar with the situation. The group approached management with inquiries about a potential restructuring, its payment plans and the state of operations but never received a response, said one of the sources."

"Three major publishers said they received payments in full from Borders for the December period but three smaller firms said the company has been delaying payments."

"The average time it took for Borders to pay back suppliers spiked over 40% to 97.9 days in the year ended 31 October, from 69.4 days in the prior year period, based on the company’s reported accounts payable and cost of goods sold."

A Borders spokesperson said the company "has continued to pay its vendors and is not aware of any material disputes related to its December 2009 payments.” (info from the Financial Times and Debtwire)


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