Shares of Borders Group (NYSE: BGP) tanked in after-hours trading Tuesday after the company reported dismal third quarter results and told investors that it had officially given up on its quest to sell itself. Comparable store sales were down 12.8% at the company's flagship superstores, and the company reported an operating loss of $39 million.The press release added that "Regarding Paperchase, as previously disclosed, Borders Group retains its right to exercise its "put" option to sell its Paperchase business to Pershing Square Capital Management for
I think that most observers had long ago given up on Borders' hopes of a sale. The company had reduced its debt load by $273 million this year by paring back on inventory, curbing expansion and selling its businesses in Austrlia, New Zealand and Singapore.
Long-term, the company's lousy financial position will make it difficult for it to compete with better-financed competitors like Barnes & Noble (NYSE: BKS), which is something it will have to do now that it's no longer pursuing a sale. Reducing inventory comes at the cost of selection and customer experience. For the same quarter, Barnes & Noble's comparable store sales decreased by just 7.4%.
Borders shares are down 40% in premarket trading (8:58 am).
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