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Borders retreats to the US

30.03.07 Graeme Neill

The Borders Group sent shockwaves through the book industry last week with the surprise announcement that it is pursuing "strategic alternatives" for the majority of its international operations, including in the UK and Ireland.

The chain is looking to its US superstores as the "key to future growth", following unsatisfactory returns from its international operations. Chief executive George Jones said: "Our company's performance has fallen short in an industry that is increasingly competitive, technology driven and price sensitive. We recognise the urgent need to go on the offensive and drive significant change."

Borders is retaining its Paperchase gifts and stationery business, along with its franchise operations in Malaysia and Dubai, and its stores in Puerto Rico. Jones added: "The franchise model requires little capital investment from Borders Group but yields high profit and growth opportunities."

Merrill Lynch has been hired to examine the options for the Borders UK business. But Borders said there was no assurance that a transaction would result from the process. Spokesperson Anne Roman said: "Strategic alternatives cover a range of activities such as sale, franchise or restructure, etc. [So] there is no guarantee that any activity will take place. It is business as usual in all of our stores."

Roman added that the move was no reflection on Roche's stewardship of the business, which he joined in March 2006 after six months' "gardening leave" from Waterstone's. "Borders Group c.e.o. George Jones has pointed out that our international stores represent good businesses with strong management, including David at the helm of the UK operation," she said. "Our decision was made to enable our company to focus on the US Borders superstore business."

Borders: the background

Michigan, it now has 1,300 retail stores worldwide. Full-year sales in 2006 were $4.06bn, with a net loss of $151.3m

Entered the UK market with the purchase of Books Etc in 1998, and opening of first Borders superstore on Oxford Street, London

Operates 43 Borders UK and Ireland high street and retail park stores and 20 Books etc, 7 airport branches branded Borders and two Borders Expresses, with 2,000 employees. Product mix includes magazines, music and film, with Paperchase and Starbucks concessions

UK and Ireland sales represent about 70% of the $650m Borders International segment, giving them estimated sales of $455m (£231m). Operating loss for the international segment in 2006 was $0.5m

Books are believed to represent at least 60% of Borders' sales. Borders claims an 8% share of the UK book market

Retail US Borders Graeme Neill

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