FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (MF Boring)

BORDERS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGP)") else Response.Write("(NYSE: BGP)") end if %>
500 E. Washington St.
Ann Arbor, MI 48104
(313) 913-1100
http://www.borders.com

ANN ARBOR, Mi., November 14, 1996/FOOLWIRE/ --- Yesterday, Borders Group, Inc. pre-announced operating results for its 1996 third quarter ended October 27, 1996. Today the company provided more detailed information on quarterly performance and hosted a conference call with analysts.

SUMMARY OF QUARTERLY PERFORMANCE. Borders Group reported a net loss of $2.7 million, or $0.06 per share as compared to a loss of $6.0 million or $0.15 per share for the third quarter of 1995. Analysts had been expecting a $0.09 per share loss. Consolidated sales for the quarter were $413.5 million, a 14.2% increase over last year. Consolidated gross margins grew from 22.8% of sales for last fiscal year's third quarter to 24.0% for fiscal 1996's third quarter. Selling, general, and administrative expenses were 24.2% of sales for the quarter as compared to 24.6% in 1995. Management attributed the improvement to strong sales, continuing improvements in controlling overhead expenses, and increased efficiencies in the company's regional distribution centers.

PERFORMANCE BY STORE TYPE. Sales increased 42.3% for the Borders superstores, to $212.0 million, and declined 3.8% for Waldenbooks, to $197.9 million. Comparable store sales for Borders increased 8.6% for the quarter. Borders' quarter-ending store count of 142 represents an increase of 15 units during the quarter. Subsequent to quarter-end, Borders opened an additional 6 superstores, and the total count now stands at 148. The company expects to end the year with 157 superstores, or an increase of 41 during the year. Comparable store sales declined 0.2% for Waldens. Waldenbooks closed 5 units and opened 5 during the quarter, leaving the total at 966 stores. In the conference call, management noted that their plan was to close 50 of the underperforming Waldenbooks stores in 1996 and have closed 26 so far.

PROSPECTS FOR Q4. In the conference call, management stated that they were "confident but not over-confident" about the all-important fourth quarter. They see a "pretty good" line-up of new titles coming in, including new books by Michael Crichton, Walter Cronkite, and others; but they do not yet see a "block-buster" on a par with Howard Sterns's book last year. Fourth quarter also has a compressed holiday shopping season due to the lateness of Thanksgiving this year. As a consequence, favorable weather conditions and the ability of stores to manage the holiday crush become particularly important. Some analysts have suggested that the compressed season could help bookstores, because they offer a convenient way to find something for everyone on your gift list; but because the company has never experienced a compressed shopping season since the advent of the superstores, they do not know how that will turn out. The company encouraged analysts to increase their estimates for the current full fiscal year to reflect the upside surprise in the third quarter but not to increase their fourth quarter estimates yet, owing to the inability to foresee yet how the weather and capacity variables will turn out. Management noted that they operated 460 Walden kiosks in malls last holiday season with good results, and they intend to operate at least that many this year. The company has also launched a holiday advertising campaign on TV, something they did very little of last year.

1997 AND BEYOND. Analysts requested clarification about how Waldens would be affected by the continued expansion of the superstores. Management replied that there are approximately 170 Waldenbooks that face no cannibalization of sales from a Borders and probably never will; another 100 have faced no superstore competition yet, but will. Of the remainder, the majority have already faced superstore competition for three years or longer, which is approximately the time it takes for sales to adjust to the changed environment. Altogether, the company is perhaps two-thirds of the way along in terms of absorbing these effects. The essentially flat comparable-store sales figures for Waldens in the third quarter reflect, and suggest, that the company is approximately a year ahead of its long-term strategy -- although more information in that regard will be available once the critical fourth quarter is completed.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.