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Borders continues to flounder

Posted May 30th 2007 8:10PM by Zac Bissonnette (RSS feed)
Filed under: Earnings Reports, Bad News, Amazon.com (AMZN)

Shares of book retailer Borders Group Inc. (NYSE: BGP) traded down 4.72% today as the company reported less than stellar earnings. The company lost 61 cents per share, compared to 31 cents in the same quarter last year. Same-store sales at the flagship Borders superstores declined 1.9%.

As I wrote in March, I don't really understand the company's strategy. They slashed their customer rewards program, making their books even more overpriced compared to online bookstores like Amazon.com (NYSE: AMZN). That move has done little inspire customer loyalty, and it's actually hilarious going into a Borders stores and watching the hapless clerk try to explain to a confused customer how the new program really isn't that terrible -- even though it is:

Under the old program, customers could spend $50 in a month to receive a 10% discount on all purchases on a certain day in the next month. Customers also got a 5% "Holiday Reward" on store purchases made through November 14.

Under the new plan, customers receive a $5 discount in the next month for every $150 they spend. This 3.3% discount expires at the end of of that month. Wow. What a deal.

The company's plan is to start its own website to compete with Amazon. Currently, the companies have a partnership. I can't even imagine why Borders thinks it can do online bookselling better than Amazon, and until they show that they can, I would stay far away from this stock.