Monday, November 23, 2009

Borders UK on the brink of collapse

There are too many stories about a month's absence from blogging to detail all of them, so I will stick to the most important one for the moment, and that concerns once again, the future of ailing retailer Borders Books.

For the second time this year speculation has reached fever pitch, as the retailer is once again up for sale, a mere months after it was the subject of a management buyout.

It is claimed that publishers who have spoken to The Bookseller have expressed fears over the future of the retailer, after it emerged that one distributor had cut off supply following an unpaid bill. I have never dealt with the chain stores direct, preferring that they order my own book through wholesalers (much easier all round), but I know of at one author who is owed several hundred pounds.

Anyway, rumours have mounted since it was reported on Friday that both WH Smith and HMV had walked away from possible deals, while another deal over the Borders website has also fallen through, following the departure of the web team.

Borders' corporate finance adviser Clearwater placed an advertisement in the Financial Times on last week offering for sale "the assets and trade of a chain of book and entertainment stores", with revenue in the region of £150m. The chain was described as having "prime locations on the High Street and 'out of town' retail parks" (in my opinion it is these out of town locations have been partially responsible for at least some of the problems). No asking price was given.

Borders have so far refused to comment on any of the stories mentioned above, so not surprisingly the industry is awash with rumours and speculation. In an email sent to staff last Friday, Chief Executive Philip Downer said that the chain had received "an unsolicited approach from an interested party", and that it had "retained a corporate finance specialist to investigate future possibilities for the business, in line with best practice". Downer added that a "further announcement will follow once we have confirmed information to share with you".

The fall from grace seems to have happened remarkably quickly and her reasons are unclear. Barely one month ago, Downer outlined a clear and positive vision for the future, full of ideas including a new loyalty scheme and plans for further store openings. At least four national newspapers claim that the chain is on the brink of collapse, and if so, it will be sad day indeed for the book industry. If Borders go, they will take between 7 and 10 percent of the market with them (not to mention several hundred jobs), and that business will have to go elsewhere - leading to even less competition and less choice. The staff will not be the only losers. My thoughts are with them at this difficult time.

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