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Borders Losses Deepen, New Financing to Take Hold

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May 24 – May 30, 2010 Edition Borders Losses Deepen, New Financing to Take Hold

ANN ARBOR, Mich., May 27, 2010—Borders Group, Inc. today reported continuing losses for its first quarter ended May 1, 2010. Operating loss in the first quarter was $33.5 million compared to $29.1 million in the same period a year ago. However, loss from continuing operations in the first quarter improved to $64.5 million from $86.0 million in the same period a year ago, reflecting less warrant expense compared to a year ago.

Total consolidated sales dropped $9.3 million on sales of $542.4 million compared to income of $3.0 million on sales of $641.5 million for the same period a year ago. The company’s debt load also rose in the first quarter by $14.5 million to $294.7 million, a $ 5.2% increase from the prior year. Comparable store sales in the domestic segment in the first quarter declined by 11.4%.

“Our top line remained challenged during the first quarter, yet we were able to soften the impact on our bottom line through continued cost controls,” said Borders Group Interim President and Chief Executive Officer Mike Edwards. “The $25.0 million equity investment by Bennett S. LeBow — coupled with our recently announced debt financing — strengthens our balance sheet and enables us to continue to aggressively execute a number of key financial and strategic initiatives that will transform the Borders brand. These include improving the store network to increase profitability and productivity and maximizing the digital opportunity, including growing Borders.com. We have already taken significant steps to achieve our company objectives including executing key aspects of our digital strategy. To that end, we’ve made the Kobo eReader — the first of many eReading devices we will carry — available to our customers, are preparing to launch our eBook store and mobile apps powered by Kobo next month, and are on track to introduce our ‘Area-e’ digital shops in August.”

First quarter total consolidated sales were $542.4 million, down 15.4% from the same period a year ago. The company generated a first quarter loss from continuing operations of $64.5 million compared to a loss from continuing operations of $86.0 million for the same period a year ago, reflecting less warrant expense compared to a year ago. Operating loss in the first quarter was $33.5 million compared to $29.1 million in the same period a year ago.

Domestic

Total sales within the domestic segment in the first quarter were $520.0 million, down 16.1% from a year ago. Comparable store sales in the domestic segment decreased by 11.4% during the first quarter. Beginning in the first quarter of 2009 we substantially reduced the music and movies categories to a more tailored assortment, and factoring out multimedia, comparable store sales in the domestic segment decreased 6.8% during the quarter.

Operating loss in the first quarter was $33.2 million compared to $29.3 million for the same period a year ago. The company closed six domestic bookstores during the first quarter, ending the quarter with a total of 680 domestic bookstore locations.

International

Total first quarter sales within the International segment were $22.4 million, which is up 3.7% compared to the same period a year ago. Excluding the impact of foreign currency translation, first quarter total sales decreased 2.5%.

The International segment generated an operating loss of $0.3 million in the first quarter compared to operating income of $0.2 million for the same period a year ago. Headquartered in Ann Arbor, Mich., Borders Group, Inc. employs approximately 19,500 throughout the U.S., primarily in its Borders® and Waldenbooks® stores. Online shopping is offered through borders.com.