Yesterday’s announcement that Borders was having a tough time coming up with financing for expansion and was contemplating a potential sale led to a bad day on Wall Street, but the outlook for chain book stores isn’t all that rosy over all says Marketwatch:
Shares tumbled more than 20% in morning trading [for Borders] ahead of the rescheduled conference call, and are down more than 70% for the year. Borders’ quandary would have seemed less gloomy in 2006, or even a year ago, when private-equity firms were falling over each other to snap up specialty retailers.
Meanwhile, its top rival Barnes & Noble Inc. posted a 9% decline in quarterly profit and said it expects fiscal first-quarter same-store sales at its namesake stores to be “slightly negative.” Its shares climbed, but it’s looking at a loss of more than 20% of its market value for the year.
Many things led the bookstores to this gloomy place. A book is the ultimate retail commodity, so shoppers either go for the lowest price — which leads to margin-killing price wars — or the best shopping experience.
According to the piece, both chains are rooted in their 90s heyday which saw consumers flock to the “third place” ambiance of free reading, comfy chairs and coffee bars.