Borders to Sell Build-A-Bear as E-Book Purchases Rise

Borders Group Inc., the second-largest U.S. bookstore chain, will start selling items from Build-A-Bear Workshop Inc., relying less on books for sales as more people use electronic reading devices.

Most of Borders’ more than 500 stores will create sections next month dedicated to Build-a-Bear, the maker of kits kids can use to craft stuffed animals, Chief Executive Officer Michael Edwards said in an interview. The new areas also will feature books and DVDs tied to the brand.

Borders has lost money for the past four years as customers read more on digital readers and buy books over the Web, forcing the chain to close and sell stores. The bookseller has made its own push into digital readers, escalating competition with Inc. in an industry whose sales doubled last year.

“As more books are bought online or in digital format than bought at retail, it creates really the ultimate strategic challenge in terms of redefining the bookstore,” said Edwards, 50. “We are totally rethinking it.”

Next month the book retailer also plans to open departments that will sell as many as six digital book readers, Edwards said. Currently the chain only sells these devices through its website. In larger Borders’ stores, these areas will have seating for shoppers to test the products.

“With online taking up more of the market in a few years, obviously there is less need for physical space allocated for the books themselves,” said Michael Souers, a retail analyst for Standard & Poor’s in New York who recommends holding Borders shares. “If they can find additional uses for that space, it’s a good idea.”

New Head Merchant

Sales at Borders stores open at least a year have dropped for nine straight quarters. Last week, the retailer hired Michele Delahunty-Cloutier as chief merchandising officer to lead the expansion beyond books. The position had been vacant since Edwards replaced Ron Marshall as CEO in January. Delahunty-Cloutier most recently served as brand president at Chico’s FAS Inc. She also worked at AnnTaylor Stores Corp. and Gap Inc.

Borders, based in Ann Arbor, Michigan, fell 7 cents, or 5.9 percent, to $1.11 at 4 p.m. in New York Stock Exchange composite trading. The shares were little changed this year before today. Build-A-Bear, based in St. Louis, dropped 24 cents to $5.01.

The retailer will report results for the second quarter on Sept. 2. Barnes & Noble Inc., the largest U.S. bookstore chain, on Aug. 24 posted a net loss of $1.12 for the three months ended July 31.

Build-A-Bear, which operates most of its 346 stores in the U.S., has added retail partners to spur sales growth. The company has an agreement to offer its stuffed animal kits next month at closely held Michaels Stores Inc., an arts and crafts chain.

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