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So... did anyone see Borders coming?

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Tyler Durden

Tyler Durden

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I was reading an article on smh.com.au about the collapse of Borders and Angus & Robertson, found here, which argues that the internet isn't to blame for its fall:

PEP, Australia's leading private equity firm with a $4 billion buyout fund, was first linked to Borders in March 2007. Yet it took until June the next year to close the deal. The first throes of the global financial crisis struck in late 2007, before its most dramatic turn in September 2008.

Accounts lodged with the corporate regulator show financing for the Borders transaction included PEP tipping in $105 million, including $62 million in debt.

Annual sales of about $500 million have been falling about 10 per cent a year and a $30 million writedown on inventory led to the company posting a $43 million loss last year. It narrowly avoided breaching lending covenants.

There's no doubting the internet's impact on retail but as James Stewart, a partner at Ferrier Hodgson - coincidentally the firm appointed REDGroup's administrator - said last week, it is only between 2 and 3 per cent of Australian retail.

Stores like Borders have enormous overheads, huge prime positions in retail shopping centres (are you listening Westfield?) and voluminous stock. Compounding the problem for private equity owners is timing.

Many assets the industry bought around the 2006-08 period were overpriced and filled with cheap debt that is having to be refinanced at onerous rates in a soft retail environment. Shareholders are getting nervous with the three- to five-year time frame for private equity investments.
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It seems to suggest that it had poor fundamentals, and given the amount of people here who invest based on fundamentals, I was wondering if anyone here saw this one coming? In hindsight, if one looked at their balance sheets and revenue statements, would it have been obvious that it was headed for disaster?
 
Re: So...did anyone see Borders coming?

If I were going to invest in a retailer based on fundamentals, then my research would go beyond the company accounts. I'd start by going to a few stores - if it's a dud from the customer's perspective then that alone would keep me well away from it.

That is in the same way as I wouldn't invest in an airline if their planes were all old and falling apart. That would be a pretty clear sign that part of their "profits" have come about due to running down the physical assets and this is not sustainable.

As for this particular company, my first thought was "not surprised" and that is based soley on my in-store experience. I'd go there to buy a book only if there were no alternative. Too many staff (and therefore high costs) with nothing much to do other than be worried that someone might dare read a page or two before buying the book. Maybe that wasn't the situation at every store, but it was in at least some and it's not a good way to attract customers. Add to that technological change (Kindle etc) which would presumably be having an effect too.
 
Re: So...did anyone see Borders coming?

Tyler Durden said:
It seems to suggest that it had poor fundamentals, and given the amount of people here who invest based on fundamentals, I was wondering if anyone here saw this one coming? In hindsight, if one looked at their balance sheets and revenue statements, would it have been obvious that it was headed for disaster?
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If you could have seen the financel statements would havee been able to tell, But with out seeing them it's just guess work.
 
Re: So...did anyone see Borders coming?

I'm highly alarmed frankly. If no Borders etc, where will missus leave me when "we" go shopping in town. :eek:

I guess there is always the pub. :D
 
Re: So...did anyone see Borders coming?

Border was always expensive.

$35 for a dvd
$30 for a CD

They tried to appeal to the uni crowd but they just hung out at the coffee shop on their laptops - probably d/l ebooks

i always wondered, with our dollar 1:1 with the US why aren't we charged what the US price is (which you usually see on books and magazines)

I was in the US and even in airports where you think prices would be expensive, magazines were only $5. At Borders (aust) it's $14
 
I have only ever visited Borders when in Brisbane or overseas.

It resembles a public library staffed by people more suited to working in a supermarket.

In Christchurch recently I spent 1.5 hours reading magazines and browsing books and saw not one book sold.

It is no surprise to me that they went broke.

gg
 
Garpal Gumnut said:
I have only ever visited Borders when in Brisbane or overseas.

It resembles a public library staffed by people more suited to working in a supermarket.

In Christchurch recently I spent 1.5 hours reading magazines and browsing books and saw not one book sold.

It is no surprise to me that they went broke.

gg
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I once read "Get Rich With Options" from end to end in the Perth Borders and never paid a cent for it...

...which is about all it's worth anyway. :D
 
I don't even know what a Borders looked like. Then again, I don't see why there are ANY bookshops. I gave up going into angus and robertsons when I realized its all fluff. Now I only buy from Amazon - where there is an actually legitimate selection of diverse and interesting books. :2twocents
 
Someone in the book selling business told me 5 years ago they were in big trouble. The bosses were greedy, and they employed too many uni students who had no interest in, or knowledge of, the stuff they were selling.
 
tothemax6 said:
I don't even know what a Borders looked like. Then again, I don't see why there are ANY bookshops. I gave up going into angus and robertsons when I realized its all fluff. Now I only buy from Amazon - where there is an actually legitimate selection of diverse and interesting books. :2twocents
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Thats one thing Borders did have going for it, It always had a massive range. I do like peruising through the books though, as some else said you find things you would never usually search for.

What do people think, Will the stores continue trading under new, DebtLess managment.
 
Gringotts Bank said:
Someone in the book selling business told me 5 years ago they were in big trouble. The bosses were greedy, and they employed too many uni students who had no interest in, or knowledge of, the stuff they were selling.
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haha, that reminds me of a time when my friend and I went there looking for Robert Kiyosaki's "Rich Dad, Poor Dad" as a present for a friend. We couldn't find it so we asked one of the staff members there - he said they were sold out, but could recommend a couple of books very similar to it.

He referred us to a book by 50 Cents, and a picture book of the history of Germany................:confused:

Anyway, my observations of the place also are that people seem to read the stuff there and leave instead of buying it (hell, I've done it a couple of times). What I find funny is that they sell books on reducing debt - I mean, if someone was in enough debt to want to read up on how to reduce it, I doubt they'd spend the money on the actual book when they could just read it there :D
 
I've never heard of Borders until I read this thread, was curious that's why I clicked on it. Haven't bought a book in several years, get it all online now.
 
Gringotts Bank said:
The bosses were greedy, and they employed too many uni students who had no interest in, or knowledge of, the stuff they were selling.
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Sounds like some other retailers that keep screaming about lack of sales etc.

I don't want advice on buying furniture from someone who hasn't moved out of home yet. I don't want advice on a computer for business use from someone who only ever surfs the net and plays games. I don't want to learn about making money from someone who is broke. And so on.

If a retailer is not offering useful customer service, and that is the situation with most, then I may as well buy from whoever is cheapest since there is no reason not to.
 
Bill M said:
. Haven't bought a book in several years, get it all online now.
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I don't buy books any more either. Get them from the library. Even the newest books, all one has to do is place a request for the library to buy it, and voila, in a couple of weeks it's waiting for you to collect.
Way better than spending my own money.
 
Borders was quite a hit when it first came out. Massive range, huge foot print, coffee shop, internet etc. It was a book shop experience that was unlike others. That's why it got rolled out on a pretty big scale.

I'd imagine that the financial statements looked pretty good back in those days (early 2000s?). But after the novelty worn off something changed... sales stopped growing, inventory probably increased and inventory turn lengthened. Working capital kept rising and debt servicing becomes more difficult. One should be able to see that from the financial statements if they know what to look out for.

BTW I've always thought books are sold in book stores on consignment...

wayneL said:
I'm highly alarmed frankly. If no Borders etc, where will missus leave me when "we" go shopping in town. :eek:

I guess there is always the pub. :D
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Lol. You will find me in Borders around the trading books / mags section :)

Julia said:
I don't buy books any more either. Get them from the library. Even the newest books, all one has to do is place a request for the library to buy it, and voila, in a couple of weeks it's waiting for you to collect.
Way better than spending my own money.
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Love my local library as well... although I've never made a buy request yet.
 
Not surprised in the least. I saw this company in a top ten list of companies most likely to fall over about a year ago.

Angus and robertson also own readers feast in Melbourne which is the only one that is a half decent bookstore. There has not been a decent bookstore in Australia for ages. Secondhand stores and libraries give much better choice.

A lot of publishers may fall over as a result of this. i am sure a lot of them pay a lot of money for shelf space.
 
wayneL said:
I once read "Get Rich With Options" from end to end in the Perth Borders and never paid a cent for it...

...which is about all it's worth anyway. :D
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When my family and I used to live in Carlton, I'd take my youngest daughter down to the Lygon Street Borders for her morning nap, which would last anywhere from 40 minutes to two hours. I reckon I read at least two Tom Clancy novels cover to cover (average 600 pages each), 95% of a third Tom Clancy novel, Marcus Padley's book, and The Wolf of Wall Street in a six month span sitting on those deep armchairs at Borders. Not once was I approached by a staff-member.
 
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