Borders Group Presents Long-Term Strategic Plan to Focus on Core Domestic Superstore Business

Plan Includes New Proprietary E-commerce Site in Early 2008,

Strategic Alternatives for International Segment, and Continued

Right-Sizing of Waldenbooks

Mar 22, 2007, 01:00 ET from Borders Group, Inc.

    ANN ARBOR, Mich., March 22 /PRNewswire-FirstCall/ -- Borders Group,
 Inc. (NYSE:   BGP) today presented a detailed strategic plan for the future
 that will revitalize, refocus, and ultimately reinvent the company to
 achieve its mission to be a headquarters for knowledge and entertainment.
 The strategic plan includes:
     (Logo: )
     * Revitalizing the domestic Borders superstore business to achieve, by
           - Consolidated EBIT margins of 5% to 6% compared to 1.8% in 2006,
             driven by sustained same-store sales growth in the low- to mid-
             single digits at domestic superstores.
           - Improved inventory turns of 2 times compared to 1.6 times in 2006.
     * Refocusing investments toward transforming domestic superstores while
       significantly reducing investment in segments that have not provided a
       satisfactory return, including the International segment and Waldenbooks
       Specialty Retail segment.
           - The company will explore strategic alternatives for the majority
             of its International segment, including its U.K., Ireland,
             Australia and New Zealand superstores and Books etc. business, and
             will look toward its successful franchise model for future
             international expansion in new markets.
           - Highly aggressive efforts, which began in the fourth quarter of
             2006, to right-size the Waldenbooks Specialty Retail segment will
             continue in 2007 with the goal of reducing the number of
             Waldenbooks stores from 564 at the close of 2006 to approximately
             300 by the end of 2008.
     * Reinventing the company by leveraging innovation, technology and
       strategic alliances to differentiate Borders in the marketplace,
       including the debut of a new proprietary e-commerce site in early 2008.
     Borders Group Chief Executive Officer George Jones said, "Our company's
 performance has fallen short in an industry that is increasingly
 competitive, technology driven and price sensitive. We recognize the urgent
 need to go on the offensive and drive significant change. We have begun to
 take decisive steps to once again put Borders on a path to profitable
 growth, and believe that we have an opportunity within our domestic
 superstore business to build on our key assets -- a powerful brand, a
 strong network of store locations, knowledgeable employees, and nearly 17
 million loyal members of our Borders Rewards(R) program who love our
 superstores -- to unlock profits through improved same-store sales. Our
 energy and resources are focused on this core business segment because the
 superstore is the foundation of our brand: it's how we grew into the
 respected name we are today and we believe it is the key to our future. I
 have great confidence in the abilities of our management team, with recent
 key additions, to achieve our company's goals."
     As Borders Group enacts its long-term strategic plan, management does
 not intend to provide guidance on future sales or earnings. It is expected
 that 2007 will be a year of transforming and stabilizing -- but not
 significantly improving -- financial performance. Through execution of its
 strategic plan, management anticipates returning to earnings per share
 growth in 2008, and continued growth beyond that year.
     Management does not intend to confirm or comment on sales and earnings
 estimates prepared by analysts or other third parties. Investors should not
 interpret management's determination not to comment on estimates prepared
 by analysts or other third parties as an indication that Borders Group
 believes these estimates are correct or that the company's financial
 results are expected to be consistent with the estimates.
     Revitalizing Domestic Borders Superstores
     Steps for revitalizing the U.S. superstore business have already begun
 with the improvement of key retailing practices such as:
     * Maximizing key items, impulse items, feature tables, end caps and queue
     * Increasing effectiveness of merchandise presentation;
     * Improving merchandising, assortment planning, replenishment and supply
       chain effectiveness;
     * Enhancing the effectiveness of marketing and promotional tactics; and
     * Ensuring consistency of execution across the chain.
     To further improve superstore results, the company will also leverage
 its rapidly growing Borders Rewards program, which has nearly 17 million
 members who represent an attractive base of affluent, educated customers.
 The program will be used to drive revenue through partnerships with other
 organizations, while employing customer data to tailor promotions that meet
 specific customer needs and interests. The company will soon announce
 modifications to improve the profitability of the Borders Rewards program,
 incorporating experience gained over the past holiday season.
     The company is designating several "Destination Businesses" in
 lifestyle and other categories that Borders will become known for among
 customers. In addition, stores will feature highly localized title
 offerings that reflect demographic and regional trends on a store-by-store
     Going forward, to support efforts in merchandising, assortment planning
 and supply chain, the company is refocusing its investment in merchandising
 systems with a priority on enhancing the current core Borders superstore
 system. The company's long-term systems direction and overall technology
 strategy will be under the leadership of a new Chief Information Officer,
 expected to be named soon.
     Borders will minimize investment in remodeling its existing stores
 until it has realized progress in development of a new concept store
 prototype, which the company began working on in the second half of 2006
 assisted by an external design consulting firm. The new concept store will
 bring together destination businesses, technology and experiential elements
 that will dramatically enhance the shopping experience and set Borders
 apart from the competition. In 2007, the concept store will continue to be
 refined and key elements from it will be applied to the existing store base
 as appropriate. The first of the new concept stores is expected to open
 early in 2008.
     Investment will continue in Seattle's Best Coffee and Paperchase, both
 of which have been successful at driving same-store sales increases in
 their categories and provide a solid return on investment. Borders Group
 will also continue to introduce Paperchase shops within its domestic
 Borders stores, and will open several freestanding Paperchase stores in the
 U.S. during this fiscal year.
     The company is also planning to publish exclusive and proprietary books
 to distinguish the Borders brand and drive high margin sales. Numerous
 agreements are already in process to publish titles by celebrities,
 undiscovered talents, and others who will create buzz about books that will
 only be available at Borders. Through this initiative, the company is
 leveraging its ability -- via its extensive store network and Borders
 Rewards e-mail database -- to develop bestsellers on its own.
     Refocusing Investment -- International
     Borders Group will explore strategic alternatives for the majority of
 its International segment, including its U.K., Ireland, Australia and New
 Zealand superstores and Books etc. business. The company has retained
 Merrill Lynch & Co. to assist in the process for its U.K. and Ireland
 businesses as well as Books etc. and KPMG's Corporate Finance practice for
 the Australia and New Zealand businesses. This effort will not include the
 company's successful Paperchase business, Puerto Rico stores, or the
 franchise operations in Malaysia and the United Arab Emirates (UAE).
 Furthermore, the company's operations in Singapore will be maintained to
 support the franchise operations.
     Jones said, "We've seen solid performance in our Asia Pacific stores
 and improving trends in the U.K. and Ireland. These are excellent
 businesses with dedicated employees and a talented management team. Still,
 for us to be successful in reaching the goals we have for the domestic
 superstore business, we must significantly reduce investment in the
 International segment and explore strategic alternatives.
     "We are pleased with the franchise agreements we have in Malaysia and
 the UAE because they have proven to be successful. The franchise model
 requires little capital investment from Borders Group but yields high
 profit and growth opportunities. We believe that the Borders brand has
 great global potential and long-term we will look toward the franchise
 model for growth in new markets overseas."
     The company noted that there can be no assurance that the exploration
 of strategic alternatives will result in a transaction. The company does
 not intend to disclose developments with respect to the exploration of
 strategic alternatives unless and until it has determined a specific
 transaction or course of action.
     Refocusing Investment -- Waldenbooks Specialty Retail
     In order to better focus resources on its core U.S. superstore
 business, Borders will continue its current efforts to right-size the
 Waldenbooks Specialty Retail segment. Specifically, the company plans to:
     * Continue to execute an aggressive program to close under-performing
       stores, working with an outside firm and the company's landlords to
       facilitate optimum exits;
     * Retain only stable store locations that meet acceptable profit and
       return on investment objectives, and in those stores, change product mix
       and format to drive sales and profitability.
     The company closed 91 locations in the fourth quarter of 2006 for a
 total of 124 store closures within the year. Borders Group's target is to
 close an additional 250 under-performing stores over the next two years,
 thereby reducing the number of Waldenbooks Specialty Retail segment stores
 from 564 at the close of 2006 to approximately 300 by the end of 2008.
     "Our plans for Waldenbooks are no reflection on the many hardworking
 employees at these stores," Jones added. "We appreciate the contributions
 of these employees and their devotion to this long-standing brand. As is
 our practice, we will take steps to minimize the impact of these changes on
 affected employees, including working hard to place as many employees as
 possible in other positions within the company."
     Reinventing the Company Through Innovation, Technology and Strategic
     In order to drive significant business improvements, enable technology
 deployment and cross-channel experiences, Borders will also develop its own e-commerce Web site. The new proprietary Web site, which has
 been under development since Fall 2006, will roll out in early 2008. It
 will allow Borders to extend successful in-store programs like Borders
 Rewards to the Web and give customers a live, e-commerce solution using
 existing in-store Borders Search computer stations when they want to
 special-order items. In addition, the existence of the new will
 also allow the company to enable key partnerships that will build
 incremental revenues and margins and facilitate other technology and
 cross-channel opportunities that benefit Borders customers.
     As part of the development of, the company is consolidating
 its Web properties into a single infrastructure. This will facilitate a
 seamless cross-channel experience that will integrate the in-store and
 online experiences.
     The addition of new "Digital Centers" in Borders stores will enable
 customers to learn about, interact with, and purchase new digital products
 -- such as audio books, e-books, MP3 players -- and services such as
 downloading and personal publishing that complement the Borders brand. The
 company is in the process of exploring several potential arrangements for
 key partnerships with respect to its digital offerings. The digital
 services can be made available both in-store and online as a result of the
 Web initiative.
     "We need to reinvent our business to exploit the rapid changes taking
 place in how consumers access information and entertainment," Jones said.
 "Our ultimate goal is to make Borders a vital community gathering place
 where people come together to see, touch, interact, and learn -- online and
 in- store."
     Jones concluded, "I am confident that by focusing on the transformation
 of the domestic superstore business -- through improvements in
 merchandising and marketing, consistent execution, technology, innovation,
 and partnerships we believe in -- we can return Borders Group to profitable
 growth and produce solid returns for our shareholders. Many of the steps we
 have outlined today are already underway, and we look forward to providing
 an update on our progress in May when we announce our results for the first
     Conference Call Today
     The strategic plan, as well as Borders Group's fourth quarter and full-
 year 2006 results will be presented by Chief Executive Officer George Jones
 and Chief Financial Officer Ed Wilhelm on a conference call for investors
 at 9 a.m. Eastern this morning. The call can be accessed via the company's
 Web site at For reference, in advance of the call,
 the company will also post a presentation outlining the strategic plan
 online at
     About Borders Group
     Headquartered in Ann Arbor, Mich., Borders Group, Inc. is a leading
 global retailer of books, music and movies with more than 1,200 stores and
 over 34,000 employees worldwide. More information on the company is
 available at
     Safe Harbor Statement
     This release contains forward-looking statements within the meaning of
 the Private Securities Litigation Reform Act of 1995. One can identify
 these forward-looking statements by the use of words such as "projects,"
 "expected," "estimated," "look toward," "continuing," "planning,"
 "guidance, " "goal," "will," "may," "intend," "anticipates," and other
 words of similar meaning. One can also identify them by the fact that they
 do not relate strictly to historical or current facts. These statements are
 likely to address matters such as the company's future financial
 performance (including earnings per share growth, EBIT margins and
 inventory turns, same-store sales growth, and anticipated capital
 expenditures and depreciation and amortization amounts), its strategic
 plans and expected benefits relating to such plans (including steps to be
 taken to improve the performance of domestic superstores, the exploration
 of strategic alternatives with respect to certain international operations,
 the downsizing of the Specialty Retail Segment and the development of a
 proprietary website) and its intentions with respect to dividend payments
 and share repurchases.
     These statements are subject to risks and uncertainties that could
 cause actual results and plans to differ materially from those included in
 the company's forward-looking statements. These risks and uncertainties
 include, but are not limited to, consumer demand for the company's
 products, particularly during the holiday season, which is believed to be
 related to general economic and geopolitical conditions, competition and
 other factors; the availability of adequate capital to fund the company's
 operations and to carry out its strategic plans; the performance of the
 company's information technology systems and the development of
 improvements to the systems necessary to implement the company's strategic
 plan, and, with respect to the exploration of strategic alternatives for
 certain international operations, the ability to attract interested third
     The company's periodic reports filed from time to time with the
 Securities and Exchange Commission contain more detailed discussions of
 these and other risk factors that could cause actual results and plans to
 differ materially from those included in the forward-looking statements,
 and those discussions are incorporated herein by reference. The company
 does not undertake any obligation to update forward-looking statements.

SOURCE Borders Group, Inc.