Borders turns to a new chapter: 11

  • Article by: MEGAN NICOLAI , Star Tribune
  • Updated: February 16, 2011 - 9:05 PM

The long-troubled bookstore chain will close about 200 stores across the country, including four of its seven Twin Cities stores.

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Jenna Johnson of Minneapolis looked at bargain books at the soon-to-close Borders store on University Avenue in St. Paul.

Photo: Kyndell Harkness, Star Tribune

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Slow to embrace online sales and e-books, bookstore chain Borders Group paid the price Wednesday, filing for bankruptcy protection after months of trying to stave off such a move.

The company will close about 200 of its 659 stores nationwide, including four of the seven Borders locations in the Twin Cities area. Local stores closing include shops in Maple Grove, Richfield, St. Paul and Minnetonka. The stores in Roseville, Coon Rapids and Woodbury will remain open for now.

The retailer, based in Ann Arbor, Mich., said it might close 75 more stores within the next few weeks.

Cautious consumer spending, negotiations with vendors and a lack of liquidity made it clear Borders "does not have the capital resources it needs to be a viable competitor," President Mike Edwards said in a written statement.

The Chapter 11 filing is a clear victory for competitor Barnes & Noble, which has also been in a state of uncertainty, announcing this summer that it exploring a possible sale and other options. Barnes & Noble has more stores, revenue and, most importantly in these changing literary times, a more dominant e-book strategy with its Nook. Borders didn't get into the electronic book market until last year, with Canada's Kobo Inc., but it was a year after the Nook hit the market and three years after Amazon launched the Kindle. The product has failed to generate much traction.

Barnes & Noble dominated the book landscape locally as well, with 20 stores in the state. It had twice as many stores in the Twin Cities and stores spread throughout the state, including Rochester, Mankato and St. Cloud.

The four stores Borders is closing appear to be in some top retail spots, including the Shoppes at Arbor Lakes in Maple Grove and just off I-494 in Richfield.

Jen Helm, a senior associate in retail brokerage at NorthMarq Market Experts, said many factors could have determined which Minnesota stores would close, such as store performance, whether the stores could negotiate a rent reduction, or where their closest competitor was. The Richfield store, for example, is sandwiched between Barnes & Nobles at the Mall of America and the Galleria in Edina.

"All the locations are so different, it's hard to give a specific reason why they're closing," Helm said.

The store closings could add an additional burden to the commercial real estate market, already full of empty storefronts.

"There's a glut of that kind of square footage on the market," said Dick Grones, a founding principal of Cambridge Commercial Realty.

The most likely course of action for the property's landlords would be to divide the spaces into smaller parcels to attract smaller businesses, Grones said.

Analysts cited Borders' failed Internet strategy as a major problem for the company. In 2001, it handed over its online site to Amazon.

"Amazon had no incentive whatsoever to promote Borders," said Michael Norris, senior trade analysts for Simba Information. "It really marked the beginning of the end."

Borders reported debt of more than $1.29 billion and $1.28 billion in assets. Most of that debt is owed to large publishing companies, such as Penguin Putnam Inc., Hachette Book Group and Simon & Schuster Inc. Borders has lined up $505 million in financing from GE Capital and others to help it reorganize.

Clearance sales could begin as early as this weekend. Borders, which employs more than 20,000 workers, said it is losing about $2 million a week at the stores it plans to close.

An employee at the St. Paul location, on University Avenue in the Midway area, said that though the company has not given them a time frame for closing, "business will continue as usual." Borders will honor gift cards and its loyalty program as it reorganizes.

Ironically Borders is partly blamed for the demise of many smaller independent bookstores around the country. But Jay Peterson, manager of Magers & Quinn, a bookseller in Minneapolis' Uptown area, wasn't gloating.

"We don't like to see other bookstores close; we don't like to see other booksellers on the street," Peterson said. "We had hoped those stores would be spared."

The Associated Press contributed to this report.

Megan Nicolai is a University of Minnesota student on assignment for the Star Tribune.

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