After the Memorial Day holiday in the United States, the earnings spotlight turns to Canadian banks: Bank of Montreal (NYSE: BMO), Canadian Imperial Bank of Commerce (NYSE: CM), Royal Bank of Canada (NYSE: RY), and Toronto-Dominion Bank (NYSE: TD) are all scheduled to report their second-quarter results.

While banks north of the border of generally have held up better than their U.S. counterparts, analysts surveyed by Thomson Reuters expect the four listed above to report that earnings declined between 20% and 30% since the same period of last year. All four have P/E ratios around 10, and they are paying dividends. Shares of all four have surged 50% to 83% in the past three months, but are still 26% to 38% lower than a year ago.

With a new CEO looking to bring Borders Group (NYSE: BGP) back to viability and a stock price hovering at less than than $2 -- but up big time from its 52-week low of 34 cents -- the company is revamping its board of directors in a big way.

The company is reducing its board of directors from 10 members to 8; Edna Medford and Michael Weiss will not be standing for reelection. In a press release, the company said that "Five of the remaining incumbent Directors -- Don Campbell, Joel Cohen, Amy Lane, Brian Light, and Larry Pollock --- will stand for re-election at the annual meeting, but have advised the Board of their intention to step down from the Board over the coming months as suitable replacements are found."

Borders Group (NYSE: BGP), a book retailer that competes with Barnes & Noble (NYSE: BKS), Wal-Mart (NYSE: WMT), and Amazon (NASDAQ: AMZN), reported fourth-quarter earnings on Tuesday, and I'm happy to say that they beat analyst projections! I'm sad to say, however, that beating the analysts doesn't make me want to buy this awful stock.

According to this news source, Borders delivered adjusted income equal to $1.05 per share. The market was looking for $0.95 per share. Beating by a dime is a pretty wide margin and something to celebrate. If you're a healthy company, that is. Borders is not a healthy company. It's had all kinds of problems. For instance, Zac Bissonnette recently reported on the bookseller's debt problems and how it needed to secure a loan to stay running. Elizabeth Harrow discussed the terrible holiday-selling season and the replacement of the CEO back in January. And there have been workforce reductions.

Borders Group (NYSE: BGP) announced today that it has laid off another 136 members of its corporate workforce. That amounts to 12% of its corporate workers and 1% of its overall headcount.

In a press release, CEO Ron Marshall called the cuts "necessary steps we must take along with other non-payroll expense reductions to help get this company back on track financially." The layoff report has the company's stock up more than 7% -- to 55 cents per share, about 95% lower than the stock was trading one year ago.

Massive bookselling chain Borders Group, Inc. (NYSE: BGP) reported today that holiday sales for the nine-week period ended Jan. 3 fell to $868.8 million, down 11.7% from a year ago. Same-store sales for the holiday season plunged 14.4%. The retailer said that holiday sales started off slow, but accelerated as the season continued.

Additionally, the bookseller said that CEO George Jones will be replaced by private equity executive Ron Marshall. The new chief executive has previously helmed turnarounds at food distributor Nash Finch Co. and supermarket chain Pathmark Stores Inc. Borders stated that the new appointment will help to "more aggressively drive a turnaround of the company within today's challenging economy."

Borders Group is also getting a new chief financial officer; Mark Bierley will be internally promoted to the position, replacing Ed Wilhelm.

BGP could definitely benefit from Marshall's turnaround prowess. The stock has endured a stomach-churning 52-week plunge of 95.2%, and is currently trading below 50 cents per share. By contrast, competitor Barnes & Noble, Inc. (NYSE: BKS) surged more than 9% today after scoring an upgrade from Sell to Neutral at Goldman Sachs.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Barnes & Noble (NYSE: BKS), a bookseller that competes with Borders Group (NYSE: BGP), Amazon (NASDAQ: AMZN), and retailers that stock books such as Wal-Mart (NYSE: WMT), did not do well during the third quarter. Total sales decreased over 4%. A GAAP loss of $0.34 per share was reported versus a GAAP profit of $0.07 per share in the year-ago period. On an adjusted basis, the loss of $0.21 per share missed the call by $0.05, according to this source.

Okay, is it me, or do these numbers basically broadcast loud and clear that Barnes & Noble is not worth one penny of your investment capital? Besides the above, same-store sales took a big dive of 7.4%. That should be the last nail in the coffin of the current Barnes & Noble story, one that reads like a Stephen King novel. Actually, though, it isn't. Another nail to add would be the fact that guidance has been adjusted lower by management. Now, according to CEO Steve Riggio, gross margins are doing okay. I'll skip that chapter, though, as there isn't much substance to it. Who cares about the gross margin at this point. With traffic down and probably due to get worse, a positive tale of the gross margin isn't going to make me want to buy Barnes & Noble as a value play.

So, how will booksellers such as Barnes & Noble (NYSE: BKS), Borders Group (NYSE: BGP), and Amazon (NASDAQ: AMZN) fare during the holiday season? It's an interesting question, one which is examined in an article at The New York Times. The piece talks about how the current recession seems to be affecting consumers and their desire to buy books. At the beginning of the article, two shoppers are browsing in a bookstore -- one buys, the other doesn't. Both have been affected by the bad economy. What are we to make of this?

I'll give you my take on things. Books, unfortunately, are simply not so glamorous these days. And I do think that booksellers are going to have a hard time this holiday season. With all the competition from video games and other media, the printed page just isn't that exciting to a lot of consumers. I don't think that books will be a top priority as the wallet continues to get squeezed and while job security remains an issue. Our attention spans have been cut so short these days, and they're only getting shorter. In an era of MTV quick-edits and PowerPoint presentations, 100,000-word diversions don't feel so diverting anymore.

Books are probably even less exciting to young people. Seriously, how many kids have books on their Christmas lists this year? They may want the latest Blu-ray cartoon from Disney (NYSE: DIS), or the latest Call of Duty game from Activision Blizzard (NASDAQ: ATVI), but I'm not so sure they want the latest Stephen King novel (as for me, I picked up King's latest short-story collection Just After Sunset at my local Barnes & Noble). Many kids have been introduced to the joys of reading through the Harry Potter series, but I don't think Potter will be working his magic this season. If parents do cut back this year on presents, I figure they're going to err on the side of making sure that all the non-book gifts are acquired.

Is there anything the booksellers can do about this?

MAJOR PAPERS:

• According to Yahoo! Inc (NASDAQ: YHOO), the Wall Street Journal reported that a severance plan investor Carl Icahn said is "excessively expensive" would come into play if Icahn is successful in his plan to take control of the company's board; Yahoo! maintained that the plan is structured to prevent Yahoo! from altering or dismantling it while under a proxy challenge.
• The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) almost reached a strategic deal with a group of Korean financial institutions as part of its recent capital raising initiative, and the investment bank may still sign an agreement with the Korean companies this year, inside sources said.
• According to the Financial Times, Merrill Lynch & Co Inc (NYSE: MER), UBS AG (NYSE: UBS) and Citigroup Incorporated (NYSE: C), which are most exposed to MBIA Inc (NYSE: MBI) and Ambac Financial Group Inc (NYSE: ABK), are facing further write downs of up to $10B after the bond insurers lost the battle to keep their triple A credit ratings in tact.
• A source familiar with the matter told dealReporter that Barnes & Noble Inc (NYSE: BKS) is conducting due diligence, but has not established whether it will competitively bid for Borders Group Inc (NYSE: BGP). Should Barnes & Noble indicate real interest, the biding process could be delayed, the source said.

OTHER PAPERS:

• The Detroit News reported that Ford Motor Company (NYSE: F), in an effort to keep up with changing consumer demand in the U.S., is assembling a plan that will shift entire truck plants to car production.

Borders Group, Inc. (NYSE: BGP), the arch-rival of bookseller Barnes & Noble, Inc. (NYSE: BKS), is struggling mightily. It may not go away, but it seems that there's a good chance that it will continue its business imperatives under new owners. According to a press release issued by the company, as well as this AP article, the company appears to want to sell itself at this point because, to be blunt, management appears to have failed at its job of preserving and growing shareholder value; it also has failed against online entities such as Amazon.com, Inc. (Nasdaq: AMZN) and other retailers such as Wal-Mart Stores, Inc. (NYSE: WMT). Why, as I write this, the stock is down 39%, and it is below $5 per stub. Yikes! I've been feeling pain with some of my financial stocks lately, but I feel bad for Borders shareholders, that's one torturous drop in value.

The retailer just isn't doing well; in fact, it decided to drop its dividend payout because it no longer can afford it. I'm sure shareholders were expecting such a move, but when it happens, it's always such a slap in the face. Borders is having cash issues, management doesn't seem to be confident in its current business structure, it missed earnings estimates, revenues are down, etc. Funny thing is, I actually prefer the shopping atmosphere of my local Borders store over my local Barnes & Noble outlet. Can't always go by personal experience, I guess.

Well, if one wants to speculate, one could buy some lottery tickets -- I mean, shares -- in Borders Group. I won't. Yes, catalysts could come down the line for the company, but for now, the market seems to be telling investors that this is one to stay away from.

Disclosure: I don't own any of the companies mentioned here; positions can change at any time.

MOST NOTEWORTHY: Borders Group Inc (NYSE: BGP), Cache Inc (NASDAQ: CACH) and Gilead Sciences Inc (NASDAQ: GILD) were today's noteworthy downgrades:

• Borders Group was downgraded to Sell from Neutral at Goldman Sachs, as the firm believes a merger with Barnes & Noble Inc (NYSE: BKS) is less likely following the FTC's decision to oppose the Whole Foods Market Inc (NASDAQ: WFMI) and Wild Oats Markets Inc (NASDAQ: OATS) deal.
• Cache was downgraded to Hold from Buy at Soleil, as the firm recommends staying on the sidelines until execution improves. Merriman also downgraded shares, to Neutral from Buy, to reflect the company's outlook for the remainder of FY07. Merriman believes upside may be limited until Cache can show consistently improved sales and earnings results.
• Gilead Sciences was downgraded to Hold from Buy at Deutsche Bank and to Neutral from Outperform at Credit Suisse citing high expectations for the company and little room to beat Street estimates.

OTHER DOWNGRADES:

• Merrill Lynch downgraded shares of Adams Respiratory Therapeutics Inc (NASDAQ: ARXT), Par Pharmaceutical Companies Inc (NYSE: PRX) and Sepracor Inc (NASDAQ: SEPR) to Neutral from Buy.
• First Albany downgraded shares of Volterra Semiconductor Corporation (NASDAQ: VLTR) to Buy from Strong Buy.
  
• ThinkEquity downgraded shares of Cree Inc (NASDAQ: CREE) to Sell from Accumulate.
• Morgan Keegan downgraded shares of Panera Bread Company (NASDAQ: PNRA) to Market Perform and Outperform following weak same-store-sales and guidance.