Borders Group, Inc.
(NYSE: BGP) is quickly catching the attention of many investors as it
continues to pursue a turnaround strategy that is beginning to show
results. The company’s stock is down over 50% since the beginning of
2007 as it continues to struggle against larger competitors and online
sales. However, many investors are hoping that newcomer CEO George
Jones can successfully orchestrate a turnaround for the troubled
bookseller.
Borders, the second largest bookstore in the nation after Barnes & Noble
(NYSE: BKS), recently announced that it achieved same-store sales
growth across its three business segments for the first time since the
first quarter of 2004. Internationally, the company showed the
strongest growth with sales jumping 26.9% and same-store sales jumping
10.8%. However, the company was set back by charges related to its
divesture of Waldenbooks.
Billionaire activist investor William Ackman also recently reported
increasing his stake in Borders Group to 22%. Ackman is well known
within the investment community for achieving spectacular returns by
placing large bets in troubled companies and working with them to turn
around. He has managed to return over 20% annually since his hedge
funds inception, which mirrors performance of the greatest investor of
all time – Warren Buffet.
However, a confident investor and early results do not guarantee
success for the struggling Borders Group. Ackman has shown he is not
perfect after losing nearly half of his investment last year in Target
(although he still insists it is extremely undervalued and remains
invested) and the company still faces an uphill battle against not only
Barnes & Noble but also online booksellers like Amazon.com
(NDAQ: AMZN) that can offer customers cheaper prices and convenience.
The bookseller still has a lot of work ahead of it if it, but we now
know that it is on the right track.
In the end, Borders is a great turnaround play that should be kept
on the radar of all value investors. The bookseller is has shown early
success in its turnaround strategy while at least one famous investor
has taken notice and put a substantial amount of money at stake.
Combined, these factors make BGP a stock worth watching!
Related Companies
Hastings Entertainment, Inc. (HAST)
Barnes & Noble, Inc. (BKS)
Amazon.com, Inc. (AMZN)