Friday, December 31, 2010

Borders Group - Time For The Last Act?

Looks like my beloved Borders (NYSE: BGP) will quite likely leave the stage at some point in 2011. The company announced that it has been delaying payments to some vendors will trying to work out a refinancing/funding with its current lenders.

This is not exactly what you call "bargaining from a position of strength", and it is unlikely that there is any miracle solution. Now, allowing for the fact that there is a time lag in the company's operating model that can create liquidity issues (they have to reorder inventory after a sale before the payments actually reach them), there is just no reason to be optimistic here insofar as I can see. The holidays are generally a time when retailers should be getting fat, not struggling to keep merchandise on the shelves and angering vendors by paying late.

The writing is on the walls, though. Maybe Barnes & Noble (NYSE: BKS) survives, but nationwide chains of big-box booksellers will not. The power of Amazon (Nasdaq: AMZN) is just too much to resist, to say nothing of the myriad alternatives to actually reading a book. All in all, book stores look more and more like arcades - another place I used to love to while away hours, but really no longer exists.

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