Borders running into same type of trouble it caused for corner bookshops: Amazon, Wal-Mart have chain exploring 'strategic alternatives'

Mar. 21--First, the national bookstore chains ran the corner bookshops out of business. Now the big boys are in trouble, beset by online retailers and giant discount retailers.

Borders Group Inc. said Thursday it has hired a pair of Wall Street investment banks to explore "strategic alternatives," including a sale of the company. Borders stock dropped nearly 29 percent on the news, closing at $5.07 a share.

Barnes & Noble Inc.'s chief operating officer, Mitchell Klipper, said Thursday his company will look at the possibility of acquiring Borders.

Despite its woes, Borders still plans to expand in North Texas. A new store is scheduled to open this summer in Allen, a spokeswoman said. The bookseller already has more than a dozen stores in the area.

Borders, headquartered in Ann Arbor, Mich., and rival Barnes & Noble, based in New York City, are fighting competition from online booksellers such as Amazon.com Inc., not to mention big-box retailers such as Wal-Mart Stores Inc., Costco Wholesale Corp. and Target Corp.

Nontraditional booksellers now sell more books than traditional bookstores, said John Mutter, editor-in-chief of Shelf Awareness, an e-mail newsletter for booksellers and librarians.

That puts companies like Borders and Barnes & Noble in the same tight spot they put independent booksellers in not so long ago.

"I remember doing stories about independents complaining the chains were taking the cream of the crop, discounting them heavily, and taking that market away," Mr. Mutter said. "But literally, in about the last five years, people have complained that Costco and Wal-Mart have taken the mega bestsellers and are discounting them heavily."

That doesn't write the final chapter for large bookstores such as the ones that anchor numerous upscale developments in North Texas and nationwide, however.

Barnes & Noble is planning to open or relocate another 35 to 40 stores this year. The relocations include ones scheduled this spring for Arlington, Cedar Hill and Hurst, the company said.

"Obviously, Barnes & Noble is fine," said Jim Milliot, a writer at Publishers Weekly in New York. "I don't think it means the superstores are in any sort of trouble at all."

Borders said Thursday that it earned $84.7 million, or $1.44 a share, in its fiscal fourth quarter, which ended Feb. 2. In the same period a year ago, which had an extra week, the comparable figure was $87.7 million, or $1.45 a share.

The company generated revenue of more than $1.35 billion in the quarter, compared with $1.37 billion a year ago.

In addition to hiring J. P. Morgan Securities Inc. and Merrill Lynch & Co. to explore a sale and other strategic options, Borders also said it would receive a $42.5 million loan from its largest shareholder, the Pershing Square Capital Management LP hedge fund in New York City.

The loan carries an interest rate of 12.5 percent, but Borders has two weeks to find a better financing deal.

Thursday, Barnes & Noble also announced results for its fiscal year that ended Feb. 2. It earned $115 million, or $1.79 per share, on sales of nearly $1.85 billion, in its fourth quarter.

In the same period a year ago, it earned $126.7 million, or $1.83 a share, on revenue of nearly $1.88 billion.

Barnes & Noble announced a higher dividend and projected a profit in the current quarter. Its stock jumped more than 8 percent, to $30.27 a share.

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