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NEW YORK (AP) — There will be no storybook ending for Borders. The
40-year-old book seller could start shuttering its 399 remaining
stores as early as Friday.
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The Ann Arbor, Mich.-based chain, which helped pioneer the big-box
bookseller concept, is seeking court approval to sell off its
assets after it failed to receive any bids that would keep it in
business. The move adds Borders to the list of retailers that have
failed to adapt to changing consumers’ shopping habits and survive
the economic downturn, including Circuit City Stores Inc.,
Blockbuster and Linens `N Things.
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On Thursday, Borders is expected to ask the U.S. Bankruptcy Court
of the Southern District of New York at a scheduled hearing to
allow it to be sold to liquidators led by Hilco Merchant Resources
and Gordon Brothers Group. If the judge approves the move,
liquidation sales could start as soon as Friday; the company could
go out of business by the end of September.
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Borders’ attempt to stay in business unraveled quickly last week,
after a $215 million “white knight” bid by private-equity firm
Najafi Cos. dissolved under objections from creditors and lenders.
They argued the chain would be worth more if it liquidated
immediately.
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“We were all working hard toward a different outcome, but the
headwinds we have been facing for quite some time, including the
rapidly changing book industry, e-reader revolution, and turbulent
economy, have brought us to where we are now,” said Borders Group
President Mike Edwards in a statement.
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Borders liquidation could have far-reaching effects, putting
thousands of people out of work at a time of high unemployment,
particularly in Michigan where Borders is based. The chain, which
has been shrinking in recent years, currently has 10,700
employees.
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“We’ll want to look closely from the jobs perspective of people in
the state,” said Geralyn Lasher, spokeswoman for Gov. Rick Snyder,
in a statement.
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The loss of Borders stores will deal a blow to malls nationwide,
according to real estate sources. Borders stores average about
25,000 square feet — about half the size of a football field —
and a liquidation could leave large empty spaces across the
country.
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Borders’ move to close 228 stores while it reorganized in
bankruptcy protection already increased the collective vacancy rate
of shopping centers that contained a Borders to 9.3 percent from
4.2 percent, estimated Chris Macke, senior real estate strategist
at CoStar Group, the nation’s largest provider of real estate data.
Macke calculated the liquidation of the rest of the chain could
increase the vacancy rate on that same basis to 18.8
percent.
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Additionally, Simba Information senior trade analyst Michael Norris
predicts the closing could cause sales of electronic books to fall.
Borders, for one, entered the electronic book market with Canada’s
Kobo Inc. last year. Owners of the Kobo e-reader will still be able
use Kobo software to buy and read books. And Kobo officials said
users of Borders e-book accounts, which began transitioning to Kobo
in June, will be able to access their e-books
uninterrupted.
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“This industry is going to slowly figure out that a lot of e-book
readers still use bookstores all the time to discover what’s new
before heading home to buy it for their e-reading device,” he
said.
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Perhaps a Borders liquidation would hurt the consumer most. Tanya
Ellis, 42, of Southfield, Mich., said the closings are “horrible.”
She said she and a friend would stop at a nearby Starbucks, then
visit the Borders store in Beverly Hills, Mich., and browse for
about an hour.
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“So where are we going to buy books from? I just got into reading
books the last two or three years, and they just keep closing all
these bookstores,” she said, adding that electronic readers aren’t
an option for her. “It takes all the fun out of it.”
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Justin Grant, 31, from Brooklyn, however, was less phased. Although
he had just picked up a parenting book to read on his commute home
Monday, he said he buys most of the 25 to 30 books he reads a year
on Amazon.
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“It’s much easier to get them through the mail and delivered to my
desk at work,” he said.
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It has been a long fall for Borders since Tom and Louis Borders
opened their first store in 1971, selling used books in Ann Arbor.
At its start, the brothers were mostly interested in offering other
bookstores a system they developed for managing
inventory.
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But in 1973, the store moved to a larger location and shifted its
focus to selling new books and expanding, helping pioneer the
big-box bookstore concept along with Barnes & Noble Inc. At the
time, Waldenbooks and B. Dalton mall chains, with small stores and
20,000 to 50,000 titles, were growing rapidly. The new superstores,
by contrast, offered between 100,000 and 200,000 titles, as well as
enticements to linger like comfortable chairs and attractive
lighting.
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Kmart Corp. saw the potential and acquired Borders in 1992, forming
a book unit with Waldenbooks. It then spun the bookstores off as a
separate company in 1995, the same year Amazon started selling
books online.
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Borders was slow to adapt to the changing industry and lost book,
music and video sales to the Internet and other competition. Sales
began to fall, leading to a revolving door of CEOs. By the time
Borders’ current CEO, financier Bennett LeBow, came aboard in May
2010 after investing $25 million in the company, bankruptcy was
already looking like a strong possibility.
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Borders filed for bankruptcy protection in February after being
hurt by tough competition from online booksellers and discounters.
It hoped to successfully emerge from bankruptcy protection by the
fall as a smaller and more profitable company, but pressure from
creditors and lenders eventually led the chain to put itself up for
sale and finally, seek approval to liquidate.
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At its peak, in 2003, Borders operated 1,249 Borders and
Waldenbooks, but by the time it filed for bankruptcy protection in
February that had fallen to 642 stores and 19,500 employees. Since
then, Borders has shuttered more stores and laid off
thousands.
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Borders says it expects to be able to pay vendors for all expenses
incurred during the bankruptcy cases.
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—
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AP Retail Writer Anne D’Innocenzio in New York and reporter Corey
Williams in Detroit contributed to this story.
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