Borders Group reported another disappointing quarter this morning with sales in the period ended July 31 falling 11.5%, to $526.1 million and the loss from continuing operations increasing to $51.6 million from $45.1 million in the comparable quarter in 2009. Same store sales fell 6.8%. Looking for a bright spot, Borders said sales through increased 56.2% to $15.5 million.

The deep declines in total sales and comp sales at Borders compared to a sales decline of 2.6% at Barnes & Noble's retail stores in the quarter with comps down 0.9%. In its official release, Borders had little to say about its financial performance, choosing instead to focus on the various initiatives it says will better position it to perform in the digital marketplace and for the holiday season. The company did not breakout results between its Walden specialty group and superstores. During the quarter, Borders opened one store and closed two, but previous closings in its Walden unit resulted in the company operating 679 stores at the end of the quarter compared to 886 outlets one year ago. In its conference call, Borders executives said the sales decline at its stores was due to a poor performance by its core trade book category, while bargain books and cafe segments rose.

Capital expenditures in the quarter increased to $7.7 million from $1.2 million as the company invested in digital programs and Borders said its “Area-e” digital section will be opened in all stores by the end of October. The section will sell an array of (low price) dedicated e-readers. Earlier this week, Borders lowered the price of the Kobo e-reader to $129.99 and on the Libre Pro to $99.99.

To improve the customer experience at its physical stores, Borders said it is adding more non-book product in an effort it said to differentiate itself in the market. "We are taking steps to transform our retail model, in part through high-impact strategic partnerships, like Build-A-Bear Workshop, that enable us to offer a compelling mix of lifestyle focused products," said CEO Mike Edwards in a statement. "By offering a rich and relevant selection of product - both book and non-book - together with an exceptional customer experience, we will differentiate Borders from others in the marketplace.”

In addition to the Build-A-Bear Workshop, Borders is adding more educational children toys and games, adult games and puzzles, stationery and will expand its bargain book and value book segments. According to Edwards, its research shows that its customer base is largely female and that fact will drive all of its strategic efforts moving forward.

Half way through 2010, revenue at Borders fell 13.8%, to $1.05 billion, although loss from continuing operations was reduced to 116.6 million from $132.1 million.