Borders Group Inc. (BGP) hopes to remedy its problems by striking a successful - and very challenging - balance between big cost reductions and bringing its core consumer back while adding new ones.

"All in all, we are doing whatever is necessary to get back on firm financial footing," said Chief Executive Ron Marshall during a conference call Wednesday after the bookseller posted a 54% drop in fourth-quarter net income amid a falloff in same-store sales and margins.

Some of the bookseller's skills "have atrophied," Marshall said. "We believe we can reinvigorate" them.

The effort involves doing "just about everything we do today from store service to [information technology] to logistics better than we've been doing it, a lot better, and we must establish a discipline to do it better," Marshall said in his first earnings call since becoming chief executive of the struggling bookseller in January after a management shake-up.

Borders aims to continue paying down debt while improving cash flow as it reestablishes itself as the venue for "serious readers, not for being the lowest cost retailer or the one that necessarily appeal to the masses," Marshall said.

Efforts include speeding up its order cycles to replace out of stock products to better meet demand. Borders also plans to be less promotional and less of a discounter, approaches that that are being tested and not really missed by customers, and producing an uptick in margin, Marshall said.

The company is also scaling back multimedia inventory, like CD's and DVD's, freeing up space to expand and drive sales in certain categories that it feels have more sales growth potential. These areas include better children's books, cooking and wellness.

Borders is also expanding book clubs both in-store and online.

On the cost savings side, the company has identified an additional $70 million in new cost reductions and has already taken actions to achieve them early this fiscal year.

Marshall said the company expects sales to decline throughout the year, as it plans for "only minimal capital expenditures."

Booksellers have been caught in one of the worst consumer spending environments in recent years. Borders has trimmed its work force recently, as the struggling retailer looks to cut costs amid its turnaround.

For the quarter ended Jan. 31, Borders reported net income of $29.6 million, or 49 cents a share, down from $64.7 million, or $1.10 a share, a year earlier. The latest quarter included charges of $34.9 million. Excluding items, Borders' net income from continuing operations fell to $1.05 a share from $1.26.

Revenue, meanwhile, dropped 14% to $1.09 billion.

Analysts polled by Thomson Reuters expected per-share earnings of 95 cents on revenue of $1.15 billion. Consolidated gross margin on an operating basis fell to 28.7% from 31%.

Same-store sales at U.S. Borders superstores fell 15%, while the figure dropped 4.7% at the mall-based Waldenbooks segment, which the company has been shrinking.

Sales in the international segment decreased 22%.

In March, larger rival Barnes & Noble Inc. (BKS) reported its fiscal fourth-quarter net income dropped 30% amid weak store traffic and a drop in holiday spending.

On Monday, Borders won a year extension to April 2010 of a $42.5 million loan from its largest shareholder, Pershing Square Capital Management LP, and said it would allow its right to compel a sale of its U.K.-based Paperchase gifts and stationery business to Pershing Square to expire.

The company considered selling itself last year after disclosing liquidity problems, but later decided against it. Borders has since sold off most of its foreign assets and reduced its debt.

Shares were up 11%, or 7 cents, to 70 cents in early trading. Borders' stock has slumped 92% from its 52-week high in September.

-By Karen Talley, Dow Jones Newswires; 201-938-5106; karen.talley@dowjones.com