Borders Group is counting on books for kids and kitchens to provide some growth in a tough economic environment. It also will rely on continued spending cuts and a new just-in-time book buying approach, CEO Ron Marshall said at a lightly attended annual shareholders meeting Thursday. According to Marshall, Borders will turn much of its dying music and movies section space into bigger children's book areas, and also will beef up cooking and health selections.
"First and foremost we need to be a great bookseller," Marshall said, reiterating his vision first articulated earlier this year that Borders needs to become the store where serious readers go. In recent years, he acknowledged, customers may have confused Borders with a toy store or a candy shop, a strategy of "lifestyle selling" that brought in action figures and yoga mats.
Marshall, who took over as CEO in January, said cost cutting and asset sales started by former CEO George Jones positioned Borders to weather huge hits to discretionary spending. "We dug a pretty big hole for ourselves in the last couple of years," he said. "And we have to dig ourselves out of the hole in an unbelievably difficult economic time."
Borders lost $186.7 million in the fiscal year ended in January; the company reports first quarter numbers Tuesday after the market closes. As part of Marshall's focus on internal improvements, Borders has established "a compressed cycle" of ordering books, going from 12 weeks to four weeks in mid February to about two weeks now, Marshall said. That "just in time" ordering reduces returns to publishers and allows buyers to select more titles based on more information and media buzz, said Anne Roman, a Borders spokeswoman. The change has "no downside" as store staff puts new books out every day.
Last year, Borders' total inventory declined 26% and that will continue to shrink this year, with store closings and better inventory management, said CFO Mark Bierley. Borders is relying on $120 million in cost reductions this year, including layoffs and lower debt service, to boost cash flow.
Marshall cautioned shareholders not to expect a strong rebound in sales for years. Still he sees opportunities. The company has been "really underdeveloped in kids," and its share of families in "prime kids years" was low. By contrast, Barnes & Noble has established children's departments with story hours and special events. Expanded children's book sections will be rolled out to every Borders store within 90 days, Anne Kubek, Borders executive vice president of merchandising and marketing, said after the shareholders meeting. "It's a tremendous growth business for us."
Citing a competitive marketplace, Borders declined to say how many new children's and teen titles or what square footage it will add, but one refitted Ann Arbor store now has a 900-square foot teen department with signs saying "What your friends are reading" near a display of Twilight books, games, jewelry and T-shirts. Its children's section was divided into three sections: baby and picture books, independent readers, and toys and games. Parenting and teacher books were nearby.
Borders plans to carry education games and toys and teaching devices as well as books, and will relocate young adults and teen books away from the baby and youth books, Kubek said. Teen books often will be positioned close to the manga and science fiction titles, since "teens cross-shop those."
