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Borders' CEO resigns
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April 21, 1999: 10:37 a.m. ET
Pfeffer's departure catches analysts by surprise, break-even 1st quarter expected
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NEW YORK (CNNfn) - Borders Group Chief Executive Philip M. Pfeffer resigned Wednesday after only five months on the job as part of a management shake-up that caught industry officials and analysts by surprise.
Company officials declined to comment further on the resignation, other than to say Pfeffer would be replaced by the firm's current chairman and former CEO Robert DiRomualdo on an interim basis.
Borders' board has retained an executive search firm to recommend a replacement.
But one company source said both sides ultimately decided to part ways.
"It just wasn't a good fit," the source said. "Both sides just wanted to move on."
Borders, one of the nation's leading book, music and video retailer, has been criticized in recent months for its stagnant sales at its retail stores and failure to take its business on-line quick enough -- factors analysts believe likely led to Pfeffer's departure.
Pfeffer joined the company in November 1998 after two years as Random House's president and chief operating officer. Under his direction, the company announced a new sales and marketing program in January designed to add top-line growth by opening new Borders stores.
Break-even quarter expected
The Ann Arbor-based company announced Wednesday it would take a one-time charge on its first-quarter earnings of 4 cents a share "associated with Mr. Pfeffer's departure."
That is expected to result in a break-even quarter for Borders despite a quarter-to-date superstore comparable store sales increase of 3.87 percent -- a direct result of the firm's new sales and marketing effort, company officials said.
Borders said first-quarter earnings are expected to be between 4 cents and 5 cents per share for its retail stores and a loss of 5 cents to 6 cents a share for its on-line venture, Borders.com.
"I think it's a surprise," said Dave Ricci, an analyst with William Blair & Co., of Pfeffer's resignation. "I actually like what Mr. Pfeffer was doing.
"They need someone now with strong leadership capabilities and who can guide this company through a difficult situation while reinvigorating the bottom line."
In other management changes, Bruce Quinnell was named vice chairman of Borders Group and Kathy Winkelhaus, the former president of Waldenbooks Stores, was appointed to newly-created position of Borders Group president.
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