Bankruptcy: Borders’ penalty for being a step slow

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If Borders emerges from bankruptcy protection, it won’t be the first big retailer to do so _ Kmart succeeded in 2002. But more recently, with credit tighter, retailers including Circuit City Stores Inc. and Linens ‘N Things have been forced to close.

“In the bankruptcy world today, people are given very short strings _ GM took 90 days to emerge,” said Scott Peltz, head of the national corporate recovery practice at McGladrey consultancy in Chicago. “This is not the type of restructuring that could be accomplished in short order.”

Some think Borders’ woes will be tough to solve.

“Chapter 11 does not solve any business problems at all,” said Jim McTevia, managing partner of turnaround firm McTevia & Associates, in Bingham Farms, Mich. “They are going to have to be an entirely different company than the one that went into bankruptcy protection if they want to emerge successfully.”

It has been a long fall for the Ann Arbor, Mich., company, which helped pioneer the book superstore concept along with Barnes & Noble.

Tom and Louis Borders opened their first store in 1971, selling used books in Ann Arbor. At the time the brothers were mostly interested in offering other bookstores a system they developed for managing inventory.

But in 1973, the store moved to a larger location and shifted its focus to selling new books and expanding.

At the time, Waldenbooks and B. Dalton mall chains, with small, 2,000-square-foot stores and 20,000 to 50,000 titles, were growing rapidly.

The new superstores, by contrast, ran 10,000 to 15,000 square feet and offered between 100,000 and 200,000 titles, as well as enticements to linger like comfortable chairs and attractive lighting.

Kmart Corp. saw the potential and acquired Borders in 1992, forming a book unit with Waldenbooks. It then spun the bookstores off as a separate company in 1995, the same year Amazon started selling books online.

Falling sales led to a revolving door of CEOs. By the time Borders’ current CEO, financier Bennett LeBow, came aboard in May 2010 after investing $25 million in the company, bankruptcy was already looking like a strong possibility.

Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. The company will continue to honor its gift cards and loyalty program.

Some aren’t sorry to see area Borders closing.

“They wiped out so many mom-and-pop independent bookstores … and now they’re getting what they deserve,” said John King, the owner of well-known used bookstores that bear his name in Detroit and Ferndale.

But for some shoppers, there was less glee.

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