AMS, Borders Go Separate Ways

by Jim Milliot -- Publishers Weekly, 1/17/2005

Advanced Marketing Services will stop supplying mass market paperbacks to the Borders Group's superstores and Waldenbooks outlets by March, at which point the chain will assume fulfillment. Borders spokesperson Beth Bingham said the company was "in the position to manage the supply chain ourselves," now that it has the warehouse capacity to inventory the books. Bingham said there would be no disruption in Borders's mass market business during the transition.

The agreement with Borders was worth about $95 million to $100 million to AMS in the fiscal year ended March 31, 2004—approximately 10% of its total revenue. Despite the sales volume, AMS said it only broke even on the deal in fiscal 2004 and that it will lose money on the venture in the 2005 fiscal year. AMS began servicing Walden about six years ago, said AMS spokesperson Chuck Williams, and as AMS ramped up its business with the company it was relatively easy to hit the incentives necessary to make the venture profitable—AMS earned $7.2 million in incentives in fiscal 2004. But with the rollout to all Borders stores complete, those targets were harder to reach, Williams said, adding that a plan to expand the service beyond Borders had been abandoned.

In the latest update on when its long-delayed 10-k report for fiscal 2004 may be completed, AMS reported that "substantial progress" has been made, although it offered no timetable for when the 10-k filing, along with the quarterly reports for the year, will be released. The company did say that it has settled on a figure of $11 million as the amount its net income will be reduced for the fiscal 1996 through 2003 period.