It’s been tough for any retailer to stay afloat, especially for a bookstore chain in heavy debt.
In an attempt to save itself once again, Borders Group – the money-losing book retailer – has named an activist hedge fund executive as its chairman a week after replacing another key staff member.
The New York Times: The appointment of the executive, Richard McGuire, to replace Larry Pollock as chairman would occur a week after Borders named Ron Marshall, a private equity executive with corporate turnaround experience, as its chief executive. Mr. McGuire, known as Mick, is an executive at Pershing Square Capital Management, the activist fund that is Borders’s largest shareholder and has agitated for change at the company over the last year.
Apart from the new appointments, Borders also hired restructuring advisers who had said that bankruptcy of the bookstore chain is not necessarily imminent despite its deepening financial troubles. But let the facts speak from the themselves?
Shares in Borders fell 16 per cent on Monday to 62 cents. They have fallen 93 per cent over the last 12 months.
The New York Stock Exchange recently warned Borders that it could face delisting for failing to maintain a $1 stock price for 30 consecutive trading days, a problem that the company has six months to correct. With a market value of about $37.5 million, Borders is also approaching the minimum requirements of the Big Board. If Borders’s market value falls below $25 million for 30 consecutive trading days, the company will be delisted automatically.
On Monday, the company said that holiday sales in the nine-weeks that ended Jan. 3 dropped 11.7 per cent, to $868.8 million.
After a futile attempt to get online by breaking its seven-year representation with Amazon and a desperate, unsucessful move to sell itself this summer, Borders might have as well reached its borders.
In addition to the freefalling stock and the frozen retail market, Borders is due to return a $42.5 million loan next month to Pershing Square. The investor has lost a bunch in 2008 on other retail investments, including Target.
It is unclear what the Pershing’s CEO William Ackman might do with Borders, but the investor might be looking for a way out from the bookstore industry since it sold its 11.8% stake in Barnes & Nobles last week.
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