Stock of the Day
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Borders Group (BGP)
Borders Counteracts Potential NYSE Delisting with New Management Team
For the last year, popular bookseller Borders Group has been battling this economic storm, as have many other popular retailers. The company has eliminated jobs, sold some parts of the business, and has completed efforts to try to attract new customers. Until as recently as November, executives were even considering selling the entire company, although they eventually decided this was not the right decision. And yet despite all of the changes the company has made so far, things are still looking grim for the company. What exactly is the company currently facing, what obstacles must still be overcome, and is there any hope of a happy ending?
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This morning, Borders announced two large hurdles that they are currently facing. Borders Group is currently listed as part of the New York Stock Exchange, and to remain listed, there are certain requirements a company must continue to meet. One of them is that the stock price must remain above $1 per share; if a company trades below that level for 30 days, the company is then given six months to make improvements and get the company to trade above $1 for at least 30 consecutive days during that period. Borders has fallen below that level, so it is now critical that they make more drastic changes. However even if its stock price improves, another requirement set by the NYSE is a minimum market capitalization of $25 million. Borders is getting close to falling below that level, and if they do, they could be removed from the NYSE immediately, with no time given to make improvements.
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Another demonstration of Border's current problems was their second announcement this morning that holiday sales fell significantly from last year. Same store holiday sales fell 14% from 2007, and sales for the 9 week period which included November and December were down almost 12% from last year. Although the company may have a loyal consumer base, overall sales volume has just decreased; books, CDs, and DVDs are usually not necessities. And as the company has continued to struggle, their share price has plummeted, losing 95% of its value in the last year, and prompting the concerns about its NYSE listing.
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Although this was a lot of bad news to announce in one day, Borders paired it with something that hopefully with give investors some hope and optimism; effective immediately, the company is making a few management changes. CEO George Jones is being replaced by Ron Marshall. Marshall is the founder of Wildridge Capital Management, a private equity firm, and has served as both a CFO and CEO for other businesses. As CEO for Nash Finch Co. (NAFC: Charts, News, Offers), Marshall was able to bring the company out of their financial problems, and hopefully he will be able to do the same for Borders. The company also announced replacements for the CFO, CAO, and a new executive vice president of merchandising and marketing.
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Since this morning's announcements, share prices have increased as much as 20%, but the company still has a long way to go before they can break above the $1 mark again. This batch of management changes is a serious move, and hopefully it will provide the momentum needed for the company to recover from its current downward spiral. If the company doesn't turn around, it will face many consequences, including a potential removal from the NYSE, and the possibility of having to reconsider putting itself up for sale. The new management team will have a lot of work ahead of them, but if their changes are a success, perhaps the company will once again become a thriving member of the NYSE, and live happily ever after.
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Profile |
Click here to view a detailed profile of Borders Group.
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