Borders to sell Paperchase unit to pay down debt
Ann Arbor, Mich. Borders Group Inc. said Tuesday it will sell its Paperchase Products Ltd. stationery subsidiary to British private equity firm Primary Capital Ltd. for $31 million in order to reduce the retailer’s debt load.
The move is Borders latest salvo in its ongoing effort to cut costs and improve profitability since financier Bennett LeBow invested $25 million in the struggling chain in May, becoming the company’s largest shareholder, chairman and CEO.
Borders said it will continue to buy and carry Paperchase products in its U.S. stores. The book retailer bought a majority interest in U.K.-based Paperchase in 2004 for $24.1 million.
It will use $25 million of the proceeds to reduce the amount outstanding under its $90 million term loan credit facility.
The deal is expected to close within the next week.
“The sale of our Paperchase business is another major step in strengthening our balance sheet — and enables us to place an even greater focus on our financial and strategic initiatives, which are vital to a Borders turnaround and revitalization of the brand,” said president Mike Edwards.
Borders has been struggling for several years as it faced falling demand and increasing competition from discounters and online book sellers.
Same story, different month
Delinquency trends within Target’s portfolio of credit card receivables continued to show improvement in June. The percentage of accounts 60 days past due sank to 4.9% in June, the lowest level so far this year and a sharp improvement from the 5.2% seen in May. The percentage of accounts 60 days past due is approaching levels not seen since the summer of 2008. Also showing improvement are the number of accounts 90 days past due. Roughly 3.6% of accounts are 90 days past, down from 3.7% in May and 4.5% at the beginning of the fiscal year.
No wonder traffic is up
Target was the top-ranked retailer during the first half of 2010 in terms promotional advertising pages, according to Kantar Media, with roughly 1.3 billion pages. That figures represents a 67% increase from the first six months of 2009 when the company also was the top-ranked retailer in terms of promotional pages. Following Target in the ranking of promotional pages were Dollar General, Walgreens, PetSmart, Family Dollar, CVS, Kroger, Petco, Publix and Ralphs.
The promotional data was part of a study in which Kantar examined free standing insert (FSI) trends during the first six months of the year and discovered a 10.1% increase.
“In addition to Target’s expanded use of cooperative FSI coupon vehicles to support their retailer promotion activity, other leading retailer are expanding their use of retail promotion events, especially with the food, drug, value and pet specialty channels,” said Mark Nesbitt, president of Kantar Media Intelligence. “One of the trends observed in response to the declining economy was consolidation of retail shopping trips within the super center format. The increase used of retail promotional events wtih cooperative FSI coupon vehicles may be an effective retail response to company the consolidation of trips.”