The Borders Group's top priority is to continue to rapidly increase both the company's sales and earnings, company CEO Phil Pfeffer told PW. To achieve that objective, Borders intends to continue to expand its core domestic retail business, add additional stores to its international operation and exploit Internet opportunities, according to Pfeffer.

The company, which had 250 superstores at the close of fiscal 1999 on January 31, plans to open approximately 50 Borders stores in the U.S. this year. Pfeffer explained that Borders intends to pursue an aggressive store-opening policy because it "has more dots to fill in on the map" than Barnes &Noble, which already has more than 520 superstores and has steadily scaled back the number of superstores it opens annually.

While Borders' plan to continue to open superstores is consistent with its recent strategy, the company is reversing its policy of downsizing its Walden operation, and Walden will have a net gain in stores this year. Walden ended fiscal '99 with 900 stores and the company plans to open 15 outlets this year. "We are very, very committed to mall-based bookselling," Pfeffer said. Pfeffer's enthusiasm for Walden's future is based in part on the fact that many new upscale retailers are opening stores in malls, bringing in new customers. In addition, he noted, the continuing downsizing of Dalton is often leaving Walden as the only bookstore in a growing number of malls. "Walden will be an important part of Borders as we move forward," Pfeffer said, adding that he is looking for the chain to post comparable store gains of up to 1%.

Part of Borders' mall strategy involves the operation of kiosks, especially during the holiday season. Operated by Walden, kiosks have helped build the chain into one of the leading calendar retailers. In an effort to expand its mall business, Borders has acquired All Wound Up, a kiosk-based operation that sells interactive toys and novelty items. All Wound Up has seven year-round locations and operates an additional 83 seasonal kiosks.

In the international arena, Borders plans to open a total of four Borders superstores and to add three Books etc. in the U.K. Pfeffer told PW he has been pleased with the progress Borders has made in the international market.

In addition, as part of Borders' growth program, Pfeffer said the company will exploit the Internet in two ways: using e-commerce to sell titles directly online and taking advantage of Web-based technologies "to enhance the in-store environment." The company will spend a "significant amount of money" to ramp up its e-commerce site, which Pfeffer expects to do about $25 million in business this year, compared to $4.6 million in fiscal '99.

Pfeffer is equally excited about what the Web can do to improve sales at its brick-and-mortar stores. According to the CEO, Borders has built the necessary platforms on which it can support a number of Internet activities. Its superstores, for example, have Internet-based special-sales programs through which customers can order any title not carried by a particular store. The title is currently shipped to the store from which it was ordered, but the company expects to be able to ship books directly to consumers' homes before the end of the year. Similar Internet efforts will be launched at Walden stores during the year.

Pfeffer acknowledges that its approach to the Internet is different from its major competitors; because losses come right out of the company's bottom line, Borders is concerned about how much it invests in the Internet. "We look at our Internet initiatives carefully.... Everything we do, we want to do first class," Pfeffer explained.

While Borders' strategy produced record sales, earnings and cash flow last year, those results are not reflected in its stock price, which continues to hover around the $15 level. Although Pfeffer admitted he is frustrated that the stock price is not higher, he gave no indication that the company has plans to overhaul its operations by devoting an unlimited amount of resources to the Internet, a move that could bring a bounce to its stock price.

No Publishing Plans

One area in which Borders is not planning to expand is the proprietary publishing business. "We have a few titles in Longmeadow, but we're not planning any expansion," Pfeffer told PW. Borders' publishing strategy is in marked contrast to Barnes &Noble, which publishes about 1000 titles annually in a combination of original works and reprints.