The part(s) that worried me most is/are as follows:
...Borders [is] still losing money, even having more or less eliminated capital expenditures entirely this year.Now, granted, a year ago we were only just cusping on this whole "recession" business, so it's likely Borders' Q3 numbers will look much better (simply because they'll be comparing themselves to one of their worst quarters ever), but these numbers do not look good at all: sales are down almost twenty percent and their operating cash flow's nearly been cut in half. If you listened to or read Borders' own Q2 report, the numbers look a little better, but this is because they're quoting numbers before accounting for interest, tax, depreciation, and amortization (paying back of loans), and the PL numbers are post-tax, &c. If you missed the Q2 conference call, a transcript is available here.
Consolidated sales were $616.8 million, down 17.7% from a year ago. On an operating basis, Borders Group generated a second quarter loss of $12.7 million, compared to a loss of $10.5 million for the same period last year. On a GAAP basis, the second quarter loss was $45.6 million, compared to $11.3 million a year ago. The second quarter GAAP loss includes non-operating, after-tax charges—primarily non-cash—totaling $32.9 million.
Operating cash flow in the second quarter was $40.6 million compared to $71.1 million one year ago when the company first initiated a significant inventory reduction program.
True, Barnes & Noble isn't doing so hot either, but they're still making money and their gross figures are considerably larger. BGP (Borders) is currently trading at $3.48/share on the NYSE, compared to BKS (B&N)'s $20.77. Numbers, folks. They don't lie.
Couple this with the fact that Borders.com has been trailing BN.com (though they're doing a little better this year than last) and Borders has been disrupting sales by stocking more toys rather than chasing the e-book market, and the future looks pretty grim indeed. They've reshuffled their management in recent months to try to address these issues, but frankly, I don't think it will make much of a difference.
As you can see, I'm a bit worried here, folks. What do you think?