Like Clockwork, Borders Begins Another Round of Layoffs
Troubled book retailer Borders (BGP) had some more bad news for its employees last week: Another round of layoffs has started, just over a month after the company cut 164 jobs (about 10% of its corporate-level workforce) and weeks after it swapped CEOs. According to multiple sources, on March 4 -- a date employees are already referring to on internal message boards as "Black Thursday" -- Borders instituted a company-wide layoff of all inventory supervisors, and also let go an unspecified number of part-time employees. The bloodletting may not be over; rumors continue to circulate that the company will continue to lay off more full-time employees over the next few days. Overall, Borders employs about 25,000 people.The news comes just days after Borders reportedly asked lenders to postpone calling in the balance of a $360 million loan backed by Bank of America (BAC) that was set to mature in July 2011 -- a move widely seen as an attempt by the retailer to stave off further financial peril, or even a bankruptcy filing -- and just weeks before a $42.5 million loan backed by the company's largest stakeholder, Pershing Square Capital, comes due on April 1.
When compared to events in 2009, the recent moves by Borders seem spookily familiar. At the beginning of that year, Borders replaced its then-CEO George Jones with Ron Marshall, then proceeded to lay off 136 employees at the corporate level. Just over a month later, on March 5, Borders laid off 742 employees. A corporate spokesperson explained at the time that the company's layoffs were intended to "reset its superstore management structure to correspond to sales volume on a store-by-store basis." (A Borders spokesperson did not respond to requests for comment on the latest round of layoffs.)
If history continues to repeat itself, this year's layoffs will grow, turning "unspecified" into "significant." It's yet another signal that Pershing Square CEO William Ackman's confident claim that bankruptcy was a "low-probability event" for Borders was more posturing for the markets than it was an approximation of the truth.
UPDATE: Borders spokesperson Mary Davis responded to DailyFinance's messages with the following: "Borders is always looking for opportunities to improve performance and profitability. Any recent changes are a continuation of our efforts."
