Borders announced another round of job cuts at their Ann Arbor office yesterday, only seven months after their last corporate cut (which eliminated 88 positions). It's unknown whether their new ceo (their fourth in two years), Bennet LeBow, ordered the cuts, but it doesn't bode well for the company regardless.
Now, caveat: I am not a financial authority or analyst of any stripe, so what I'm offering below should be construed as neither (a) super fancy or detailed information, nor (b) financial advice of any kind. That said:
Borders (NYSE: BGP) is currently trading at a dismal $1.25 per share, which doesn't tell you a whole lot until you realize that means their market capitalization (share price x number of shares outstanding, which is a guide to the size of the company) is only $80 million. Compare this to Barnes & Noble's (NYSE: BKS) $850 million market cap and last trade of $14.48, and you get an idea of how much Borders has shrunk over the past few years (especially given that Barnes & Noble actually has fewer shares outstanding than Borders Group).
Here's where things get a little (but not super!) technical, so feel free to skip to the end if you like.
BGP's P/E (price-to-earnings) ratio is currently -0.83; given that the P/E ratio is defined as price per share divided by the annual earnings per share (there are a few different ways of calculating these earnings), this indicates that Borders is suffering losses. I find the negative number a little strange, though, since it's my understanding that the P/E unit is in years (that is, an investor buying a share of Borders' stock would expect to wait -0.83 years of earnings to pay back the purchase price of $1.25). If anyone can clarify this point, please do so in the comments.
For context, Barnes & Noble's P/E ratio is 23.98, which seems to indicate a high forecast earnings growth for the company; then again, it also means that anyone buying BKS now is paying $23.98 for every $1 of earnings, so if we imagine another company identical to Barnes & Noble but with a lower P/E, that would be a more attractive investment. (Have I lost you yet?)
Finally, BGP's beta coefficient (a measure of the correlation between the stock's earnings and the behavior of the market as a whole) is 3.77. A positive beta coefficient means the stock's behavior is generally correlated with the market, but 3.77 is very high, which indicates that Borders' stock is pretty volatile (which you might have already guessed, given the multiple ceo changes and staff reductions they've undergone over the past few years).
Again, for context, BKS' beta is currently 1.35, meaning Barnes & Noble's stock price correlates directly with the market and is pretty stable (the overall market, by definition, has a beta of 1).
In summary (this is the end, in case you've been skipping down): while I'm no financial expert, Borders looks like it's been in trouble, is still in trouble, and will continue to be in trouble until and unless (a) they stage some kind of incredible comeback, or (b) the market as a whole returns to its former glory, pulling BGP up with it. I won't go so far as to say that I think Borders will go out of business this year or next, but things aren't looking good.
Financial experts, armchair economists, and auteurs du monde: what do you think?