Borders to Open ‘Area-e’ E-Book, E-Reader Sections in All Stores
Borders Group is setting up an “Area-e” section inside all its stores that will be dedicated to the growing e-book and e-reader category, interim CEO Mike Edwards said in a Thursday earnings call. The company has “a unique opportunity” with e-books and e-readers “as a device neutral, content-focused digital book provider,” he said. Rival Barnes & Noble has its own nook e-reader.
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Borders will “offer a wide variety of e-readers for sale in all our stores, with as many as 10 different models available in our highest volume locations,” Edwards said. “To support this, we will also sell a comprehensive array of accessories and extended warranty programs” in “well-marked digital shops called Area-e,” he said. The retailer expects “to complete the rollout of Area-e to all stores by early fall.”
Borders is also “right on track” to start a new online e-book store at Borders.com in the retailer’s Q2 that starts in May, Edwards said. The e-book store, being created in partnership with e-reading service provider Kobo, will offer more than 2 million e-book titles that will work on multiple devices, including the iPad and “popular smartphones such as” the iPhone and BlackBerry, he said.
The company sees “significant and potential large upside” in its overall Borders.com business “based on the sales volume we're experiencing” compared with its rivals, Edwards said. “That is why we are investing in improving the customer interface, checkout and search capabilities, and we are very close to identifying a senior leader” at the executive vice president level “to drive this business,” he said.
Borders is also “revamping” its rewards program, which more than 37 million customers have signed up for, he said. New features will offer “enhanced personalization” as it expands the program “beyond” discounts of the week, he said. The enhancements will “help drive sales,” he said. More details about the program will be disclosed “in the upcoming months,” he said.
The retailer already saw a spike in store traffic late last year after introducing free Wi-Fi, which also increased the amount of time customers spend in Borders stores, Edwards said.
There are various “challenges facing our business,” Edwards said. “Borders has experienced declining sales, loss of market share” and “shrinking margins” -- all “trends that must be addressed and ultimately reversed.” E-books and e-readers “will have an impact on the business, and the digital shift demands our attention,” he said, adding Borders has to “be part of the revolution in every way.”
Sales for Q4 ended Jan. 30 fell 13.3 percent from a year earlier to $937.3 million, while revenue for the full year tumbled 13.9 percent to $2.8 billion. Q4 profit from continuing operations increased to $59.9 million, or 91 cents a share, from $28.9 million, or 48 cents, a year earlier. For the full year, Borders narrowed its loss from continuing operations to $110.2 million, or $1.83 a share, from $184.7 million, or $3.07. Comparable store sales in Q4 tumbled 14 percent in its Borders division and 8.5 percent in its Waldenbooks division. For the full year, comparable store sales fell 14.4 and 8.1 percent in the divisions. Total revenue at Borders superstores fell 14.2 percent in Q4 to $723.1 million, and dropped 13.7 percent to $2.3 billion for the year. Factoring out multimedia, comparable store sales at Borders fell 10.2 percent in Q4, it said. Sales outside the U.S. jumped 18.5 percent to $51.2 million in Q4, and inched up 1 percent to $138 million for fiscal 2009.
The company closed five Borders superstores in Q4 and seven in fiscal 2009, leaving it with a total of 508 Borders superstores Jan. 30. It closed 186 Waldenbooks stores in Q4, boosting the fiscal 2009 closure total to 212, it said. The retailer ended fiscal 2009 with a total of 175 Waldenbooks locations. It doesn’t expect to close a significant number of stores this fiscal year, Edwards said.