All but one of 14 new superstores (including two relocations)planned for this year have opened, said Ed Wilhelm, senior VP andCFO. All are in the company's new concept, which reduces the spaceallocated to music, giving that space to children's and bargainbooks.

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"We continue to be very pleased with the performance of our newconcept stores," Wilhelm said. "We will be applying what we learnfrom these to the rest of the chain where appropriate."

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The company opened four new Borders superstores in the UnitedStates during the period -- all of them new concept stores -- andended the second quarter with a total of 518 domestic superstorelocations. The number of Waldenbooks stores was reduced from 532 atthe close of the second quarter 2007 to 468 at the end of thequarter.

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In coming months, the company's new Borders.com e-commerce sitewill be introduced via kiosks to the superstores to become a true"cross-channel retailer," according to CEO George Jones. "We made atrue decision to get back into that business."

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"There continues to be a lot of opportunity in that area, and itwill be a key driver for cash flow for us going forward," Jonessaid.

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Consolidated sales from continuing operations were $749.2million, down 6.9% from the same period last year. At Bordersdomestic superstores, comparable-store sales decreased by 8.9%, insignificant part because of exceptional sales in the second quarterof last year, when the last Harry Potter book was released.Excluding the Potter factor, comp-store sales would have declined5.1%. Waldenbooks' comps declined 7.0% factoring in Potter, 1.4%without. But profitability has improved: the company lost $11.3million, down from a loss of $18.1 million in the same period lastyear.

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The international segment continues to downsize: During thequarter, Borders completed the sale of its Australia/NewZealand/Singapore businesses. It continues to examine strategicalternatives for its London-based Paperchase business, Jones said.Three Borders superstores in Puerto Rico and the company'sfranchise operations in the United Arab Emirates and Malaysiaremain.

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Borders Group operates more than 1,100 stores worldwideprimarily under the Borders and Waldenbooks brand names.

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