What It Costs To Build a Borders Store
Thanks to Seeking Alpha contributor Todd Sullivan's sharp-eyed perusal of Borders' most recent 10-Q (for first quarter 2008, ending May 3), we now know how much it costs to open a bookstore:
A new Borders Books and Music Superstore costs $2.8 million to open, including $1 million in inventory requirements and $200,000 in "pre-opening costs." That's the prototype that's being rolled out right now, with multimedia creation kiosks, flat-screen TVs showing related content, and other expensive fixtures.Carry those numbers in your head for a second while you consider the idea floated by William Ackman, hedge fund manager at Pershing Square Capital Management, holder of a 30 percent stake in Borders. The Associated Press reported last week that Ackman thinks Amazon should bid for Borders' 500 stores before Barnes & Noble does.A new airport or outlet mall store requires $300,000 to $800,000 in cash, depending on the size and format.
Major remodels carry a cash requirement of $100,000 to $500,000 each.
According to AP's Joe Bel Bruno, if Amazon loses its state sales tax advantage (legislation is pending in 18 states), Ackman believes buying retail locations would be cost-effective and add same-day immediacy to Amazon's everything-in-a-few-clicks convenience.
You can't blame Ackman for trying to run Borders' share price up, but there's a hole in his strategy. Amazon ran Borders' online operation from 2001 until last Tuesday. If theirs were truly a match made in heaven, wouldn't the two companies have figured that out in the course of their seven-year collaboration?
Image: Books at Borders by Erica Blasdel via Flickr.com, CC 2.0