As it struggles to find a way to become a profitable business, Borders released its 10-K filing late Friday and its first monthly reports on how the company is faring under Chapter 11. In the financial report for the period January 30 through March 26, the retailer had a net loss of $52.6 million on total revenue of $330.7 million. And in the 10-K, Borders said that while its goal is to file a reorganization plan that will allow it to emerge from bankruptcy, it still is evaluating all of its options, including the sale of all or parts of its assets as well as the liquidation of the company.
The monthly operating statements filed Friday as part of the bankruptcy process does not paint an encouraging picture about Borders’ early performance under Chapter 11 and its 10-K filing shows a staggering loss of $300.3 million from continuing operations for the fiscal year ended January 29. Sales in the year fell to $2.68 billion to $2.25 billion.
For the February 27 to March 26 period, Borders had a net loss of $24.3 million on total revenue of $165.2 million. Revenue is comprised of sales of $91.4 million and “other” revenue of $73.8 million. According to a spokesperson, the other revenue is revenue received from the liquidators for the right to sell its inventory; Borders is recording the funds received from the liquidators over the course of the months the stores stay in business. The $91.4 million is sales from remaining stores. In the January 30-February 26 period, those sales were $127 million and included more stores and two weeks of sales prior to the Chapter 11 filing.
The 10-K included the not-so-surprising remark that there is “substantial doubt” about Borders’s ability to continue as a going concern given the various challenges it faces. Borders noted that there is no assurances that it will generate enough cash to meet its reorganization and ongoing cash needs or that it will remain in compliance with the conditions of the debtor-in-possession agreement.
The 10-K also reflects the deep hesitation most publishers feel about resuming doing business with Borders on anything close to normal business terms. Noting that its six largest vendors accounted for 60% of its merchandise, Borders said most of its top publishers and multimedia vendors are only shipping merchandise on a cash basis and that the majority of mid-size and smaller vendors are only shipping product on terms less favorable than before the Chapter 11 filing.
The company’s business strategy contained no new initiatives—restore the financial health of the company; improve the in-store experience; focus on growth categories (educational games and toys); improve guest satisfaction; expand its loyalty program (its paid program Borders Rewards Plus had 1.25 million customers who enrolled for a $20 fee); and expand its presence in the digital marketplace. The company had $259.4 million in lease obligations due for the current year, a total that was cut by $122.7 million as a result of closing 226 superstores. The closing stores had sales of $720.4 million last year and a loss of $68.4 million.
As for results in 2010, comp sales were down 10.5% and the company closed 45 outlets. Sales through Borders.com rose by $11.8 million in the year. Comps were down in most all categories with the biggest exceptions being toys and games and digital devices. Total sales of books fell to $1.58 billion from $1.73 billion in 2009.
