CHICAGO (Reuters) - Borders Group Inc BGP.N plans to close most of its Waldenbooks stores as it cuts costs and strives to pay down debt amid a bleak environment for U.S. book retailers.
“We are doing whatever is necessary to get back on firm financial footing,” CEO Rob Marshall told analysts on Wednesday during a conference call, his first presentation to Wall Street since taking the helm at the No. 2 U.S. bookseller in January.
His comments came a day after Borders posted a 57 percent drop in quarterly earnings, though that was not as bad as analysts had expected.
Borders shares were up more than 26 percent at 80 cents in morning trading on the New York Stock Exchange.
Marshall told analysts that he has spent most of his first several weeks as chief executive getting the company’s financial house in order.
The company plans to cut expenses by $120 million in the current fiscal year, compared with a year earlier.
He also said the company needed to increases sales and was focusing on areas where it can sell more books, including the children’s and health and wellness segments.
Borders is also focusing more on in-store customer service and trying to improve margins by being “smarter” about how it implements promotional offers and in-store discounts.
“Promotional spending and discounting is important,” Marshall said. “We just need to do it with a plan.”
Still, Marshall also said late Tuesday, that he expected sales to continue to decline in 2009.
Borders has been sharply cutting back on the number of Waldenbooks stores it operates, while also closing some of its namesake stores.
During the conference call, executives said the company was likely to eventually cut the number of Waldenbooks stores it operates to somewhere around 50 to 60 from the current level of more than 300.
The book store industry has been struggling for some time amid intense competition from online rivals like Amazon.com (AMZN.O) and lower CD sales as music has gravitated online. Those pressures have only increased in the recession, as shoppers have cut back on nonessential purchases such as books and music.
Borders has laid off workers and cut other costs as it strives to pay down debt.
On Monday, largest shareholder Pershing Square Capital Management extended a deadline for Borders to repay a $42.5 million loan. That loan deadline had been extended twice previously.
Cash flow from operations rose by $128.6 million in the fiscal year that ended January 31, from a year earlier, while selling, general and administrative expenses fell $96.5 million, the company said.
Debt was $217.8 million at the end of the year, down 39.3 percent.
Inventory was down $326.8 million. The company has reduced its book order cycle to four weeks from 12 weeks, a move that lets it avoid excess inventory and costly charges to return books to publishers, it said.
Reporting by Brad Dorfman, Aarthi Sivaraman and Alexandria Sage; Editing by Derek Caney and Maureen Bavdek