Borders to Acquire Kiosk Operator All Wound Up

Borders Group Inc., the No. 2 bookstore chain criticized by Wall Street for its modest Internet showing and sluggish retail sales, said Wednesday that it will boost its shopping mall presence by buying a seller of toys and novelties at kiosks.

All Wound Up will retain its name and be operated as a unit of Borders’ Waldenbooks, which has 600 seasonal mall kiosks. Waldenbooks uses its mall stores’ staff to manage Day-by-Day, a calendar kiosk, and Animal House, which sells items for pets and their owners. All Wound Up has seven year-round and 83 seasonal outlets.

“We feel this is going to be a great addition to our kiosk program,” said Linda Caine, a spokeswoman for Waldenbooks. “We simply were looking to expand on the opportunities we see in the kiosk business.”

Borders has good reason to look to new businesses, some Wall Street analysts said. It was a latecomer to Internet retailing and has yet to market its Web site on the scale of rivals Amazon.com and Barnes & Noble. Borders also posted weaker-than-expected sales in the last couple of quarters, with sales in stores open at least a year up just 3.5% for 1998.

Same-store sales during the fourth quarter were up just 1.7%. Same-store sales, which compare sales from the same month of the previous year, are considered a good measure of retail performance.

Waldenbooks, the downtrodden stepsister of the trendy Borders stores, saw same-store sales fall 1% during 1998, with fourth-quarter sales unchanged from the previous year.

Borders’ stock has suffered, falling from more than $41 in July to less than $14 on Wednesday. All of which had some analysts wondering why the company would add All Wound Up to its holdings. “I’m not impressed with this,” one analyst said. “It’s not negative, but not terribly meaningful.”

Another analyst, Mark Mandel of ABN Amro in New York, said he was surprised by the acquisition but likewise didn’t think it would have a material impact on the book seller’s bottom line.

Mandel added, however, that the company has suffered “unfairly harsh treatment by the investment community. It’s still very solid and very productive. They have made some mistakes, but they don’t deserve to have a stock at these levels. It’s a little too much punishment for the crime.”