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Borders could face a liquidity shortfall in early 2011 as the US retailer revealed losses almost doubled in its third quarter to $74.4m from a year ago.
The bookseller said in its results to 30th October that third quarter sales were $470.9m, a decrease of 17.6% from last year.
The retailer said due to lower than projected sales and its borrowing capacity being reduced because of a third party valuation of its inventory that was lower than expected, it was seeking replacement liquidity to last it until 2012. It mooted that it could sell assets as well as embark on cost reduction initiatives or sales. However, it warned if it failed to gain the required liquidity, it could be in violation of its credit agreements in the first quarter of next year, leading to a liquidity shortfall. Debt net of cash at the end of the quarter totaled $331.1 million compared to $379.3 million last year.
Mike Edwards, Borders c.e.o., said: "Our third quarter results reflect the business challenges facing Borders and the industry at large. While we are disappointed with third quarter results, my management team and I continue to vigorously address these challenges and our commitment to winning at retail is stronger than ever."
Borders said the sales decrease was exacerbated by the closure of 204 bookshops between the end of Q3 2009 and Q3 2010. It said sales on Borders.com increased year on year by 24.0% to $43.3m. Edwards said: "We also invested strategically in our Borders.com business, redesigning the site and adding a number of services, which we are confident will greatly enhance the customer experience. We see Borders.com as an extension of our bricks and mortar business, and we'll continue to make prudent investments in the site, not to displace our stores, but rather to support and enhance the in-store experience."
Earlier this week, US investor William Ackman raised the possibility of buying both Borders and Barnes & Noble and merging the retailers.