, 2005 The original Borders bookstore was established in 1971 at 209 South State Street,
Ann Arbor, Michigan, United States; founded by brothers Tom and
Louis Borders during their study at the
University of Michigan. In 1975, they bought out the stock of Wahr's, an 80-year-old bookstore that was ending business at 316 South State Street, hiring Michael Hildebrand and Harvey James Robin to manage and stock it with rare books. Hildebrand had managed Gibson's used and rare book department in East Lansing and Harvey Robin had restored rare books and moved his bindery upstairs. Wahr's was previously a textbook and school supplies vendor, but the brothers did not deal in textbooks. They moved the retail bookshop to larger quarters down the street at 303 South State, in the former Wagner and Son men's clothing store. The old shop was renamed Charing Cross Bookshop and Tom Frick was sent from the new bookshop to help. In 1985, the company opened its second location, in
Beverly Hills, Michigan. The downtown Ann Arbor store moved across the street again in 1994 to 612 East Liberty Street, at the southwest corner of Liberty and State Streets, in the building once occupied by the defunct
Jacobson's Department Store. Although not the original location, it was identified as "Borders #1" as the flagship store. Former
Hickory Farms president Robert F. DiRomualdo was hired in 1989 to expand the company.
Kmart and Waldenbooks Borders was acquired in 1992 by
Kmart, which had also acquired mall-based book chain Waldenbooks eight years earlier. Kmart had struggled with the book division, having tinkered with assortment and later discounting. In the Borders acquisition, Kmart merged the two companies in hopes that the experienced Borders senior management could bail out floundering Waldenbooks. Instead, many of the Borders senior management team left the company, leaving behind an even larger and more unwieldy division for Kmart executives to handle on the heels of aggressive expansions by rivals
Barnes & Noble and
Crown Books. Facing fiscal problems and pressure from stockholders, Kmart spun off Borders in 1995, in a structured stock-purchase plan. The new company was initially called Borders-Walden Group but renamed Borders Group by year end. In 1994, Borders briefly operated All Wound Up, a mall-based toy and novelty store. Most All Wound Up stores were seasonal kiosks in shopping malls. Borders was rumored to open stores in Canada, starting with a retail store in Toronto. However, this was rejected for failing to meet Canadian ownership regulations for book retailers. At one point, the highest-grossing location in the U.S. was a remodeled and expanded store in Puerto Rico, generating $17 million in sales annually. Another notably large and successful location in the U.S. was located at
5 World Trade Center in
New York City, but the store sustained damage and was closed following the
September 11 attacks.
Changes in business plan In 1998, Philip Pfeffer succeeded Robert DiRomualdo as chief executive. In 2003, Borders had 1,249 stores using the Borders and Waldenbooks names. In 2004, Borders arranged for
Starbucks subsidiary
Seattle's Best Coffee to operate cafes in its domestic superstores under the Seattle's Best brand name. In March 2007, Borders Group announced it would halve the Waldenbooks outlets to about 300 over the next year. In 2008, Borders opened 14 concept stores nationwide, including a Digital Center, offering electronic devices such as MP3 players, digital photo frames, and the
Sony Reader. The concept stores were located in Ann Arbor, Michigan;
Denver, Colorado;
Las Vegas, Nevada;
Panama City Beach, Florida;
Noblesville, Indiana;
Monroeville, Pennsylvania; and
Alameda, California. The latest Borders Digital Center opened in Alameda in January 2008. In late 2007, Borders installed digital video monitors in some stores. The monitors displayed special programs, news, sports, and financial information through Ripple Networks, Inc., a California-based marketing service. Borders Group also launched Borders Rewards, a free program including coupons and opportunities to earn store credit, unlike the Barnes & Noble paid membership discounts program. Following the lead of Barnes & Noble, the chain discontinued Wi-Fi fees in September 2009.
Declining profits Borders last annual
profit was in 2006, with yearly income dropping by $1 billion over the next four years. In March 2008, Borders Group announced the intention to sell the chain because of financial difficulties. Borders Books was rumored to have approached Barnes & Noble in hopes of a buyout. The chain was in debt, having increased its financial instability by borrowing US$42.5 million in March from
Pershing Square Capital Management, the company's major stockholder, to keep the company running through the remainder of the
fiscal year. The loan had a very high interest rate of 12.5%, which meant that the chain needed to post a significant profit to stay solvent. Following the announcement of the loan, Borders's shares dropped 28.6% to $5.07/share. The shares continued to drop over the year, on December 11, 2009, Borders stocks traded at $1.30 on the NYSE, which was up almost a point from a low of $0.530 on January 28, 2009. On January 5, 2009, Ron Marshall took over as chief executive. Former CEO George L. Jones received a
severance package of $2.09 million. The changes in management were due to Borders's holiday sales having fallen by 11.7% to $868.8 million. On March 30, 2009, Marshall announced that the loan from Pershing Square would be extended for another year (coming due on April 1, 2010), at an interest rate of 9.8%. This, combined with layoffs and new promotional deals with major publishers, caused Borders stock to rise, topping the $1.00 mark within a week. By mid-April, it had approached $2.00. As a result, the company cancelled plans to ask shareholder permission for a
reverse stock split. On August 11, 2009, Borders revealed the replacements for five of the eight-member board of directors, who had previously announced their intentions to quit. The new members included Paul J. Brown of
Hilton Hotels, Timothy V. Wolf of
MillerCoors, and Dan Rose of Facebook. On November 5, 2009, Borders announced that it would close some Waldenbooks stores to improve the profitability of its Specialty Retail operations. By January 2010, 182 stores had closed. Holiday sales figures for 2009 were "disappointing", with total sales of $846.8 million, (~$ in ) down 14.7% from the previous year. Employees reported major cuts were made in payroll hours. At the beginning of 2010, the company operated 511 Borders superstores in the United States. The company also operated 175 stores in the Waldenbooks Specialty Retail segment, including
Waldenbooks, Borders Express, Borders airport stores, and Borders Outlet stores. On January 26, 2010, CEO Ron Marshall resigned to become president and CEO of
The Great Atlantic & Pacific Tea Co. Following his announcement, Borders stock fell below one dollar per share. During his tenure at Borders, all top executive officers resigned (or were encouraged to leave), including some who had been with the company for over 20 years. Mike Edwards (vice president and chief merchandising officer) was appointed interim CEO. On March 31, 2010, Borders announced that the Pershing Square loan had been paid in full. In early April, the company's stock rebounded to $2.45 per share. On May 21, 2010, it was revealed that
Bennett S. LeBow, chairman of
Vector Group, was making a large private investment in Borders stock. As a result, both LeBow and
Howard Lorber, president and CEO of Vector Group, joined the board of directors. Following chairman Mick McGuire's resignation, LeBow was elected chairman of the board. On June 3, LeBow became CEO of Borders Group. Mike Edwards became president of Borders Group and CEO of Borders, Inc., the company's principal subsidiary. The company reported significant losses for the third quarter, compared to 2009. At the end of 2010,
Business Week and
BBC News reported that Borders would be delaying its payments to publishers for inventory already received, to preserve liquidity. This was prompted by problems in refinancing its credit facilities.
Bankruptcy and liquidation On February 16, 2011, the company announced that it had filed for
Chapter 11 bankruptcy protection, listing $1.275 billion in assets and $1.293 billion in debts in its filing. The company also announced the
liquidation and closing of 226 stores. Two private-equity firms,
The Gores Group and Najafi Companies, expressed interest in purchasing half of the remaining Borders Group stores. Despite a purchase offer from the
private equity firm Najafi Companies, Borders could not find a buyer acceptable to its creditors before its July bidding deadline, so it began liquidating its remaining 399 retail outlets, with the last remaining stores closing in September. Rival bookseller
Barnes & Noble acquired Borders's trademarks and customer list. Borders Group announced on July 1, 2011, that Direct Brands would acquire the assets for $215 million and assume of $220 million in debt. Borders store in
New York City A group of Borders creditors rejected the Direct Brands takeover bid in July 2011. Borders filed for an auction and the motion was approved; however, the bid deadline expired on July 17 without a bidder. A United States bankruptcy judge approved a petition to liquidate; resulting in the company converting their Chapter 11 case to
Chapter 7. On July 22, 2011, Borders started closing its remaining 399 stores with a phased roll-out. Business operations ceased in September 2011. Former rival and the current second-largest chain of bookstores in the United States,
Books-A-Million, bid to acquire 30 to 35 stores and their assets on July 19, 2011, the day liquidation was approved by the courts. However, the two sides were unable to come to an agreement. Books-A-Million again offered to buy portions of Borders Group, purchasing the leases for 21 stores primarily in New England and Pennsylvania. Borders USA closed its remaining stores on Sunday, September 18, 2011. The Borders online store closed on September 27, 2011, at 10:30 pm Eastern. A banner then appeared on their website allowing users to browse, but directed to Barnes & Noble to complete their purchases. All Borders customers had until October 29, 2011, to opt out of their personal contact and purchase information being transferred to Barnes & Noble. On October 1, 2011, Borders cardholders were informed by email: "As part of Borders ceasing operations, we Barnes & Noble acquired some of its assets including Borders brand trademarks and their customer list." The federal bankruptcy court approved this sale on September 26, 2011. == International operations ==