Bad Times at Borders

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If Borders Group’s recent history had a book title, it might borrow one from Lemony Snicket—A Series of Unfortunate Events.

The bookseller is confronting more business and financial troubles than the kids in the children’s series face leeches and hurricanes. In the past year it’s skirted insolvency, sold assets worth about $150 million, and laid off 156 people at its Ann Arbor headquarters.

CEO George Jones, hired two years ago, says he’s optimistic that his strategic plan will lead Borders Group, Inc., back to profitability. He sees promising early results from new prototype stores and a new, in-house website. And at a time when other national retailers are going bankrupt, a hedge fund has thrown the company a badly needed financial lifeline.

But Borders is still stalked by an array of demons, from elevated debt levels to what some call a “dumbing down” of its stores. Its customer loyalty program, Borders Rewards, which management lauds as a success, has cut into already-thin margins. And Wall Street has all but given up on the company: since mid-2007 its shares have lost three-quarters of their value. Many stockholders seem to be holding on only in hopes that someone else will buy the company: in August, Borders shares fell again after the Wall Street Journal reported that archrival Barnes & Noble was unlikely to make a bid.