SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10 - Q
(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended April 25, 1999

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

                   For the transition period from to .

                         Commission file number 1-13740

                               Borders Group, Inc.
                              --------------------
             (Exact name of registrant as specified in its charter)


               MICHIGAN                              38-3196915
              ----------                             ----------
       (State or other jurisdiction               (I.R.S Employer
        of incorporation or                        Identification
           organization)                               No.)


              100 Phoenix Drive, Ann Arbor, Michigan 48108
             ---------------------------------------------
               (Address of principal executive offices)
                               (zip code)

                             (734) 477-1100
                             --------------
          (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No


  Title of Class                             Shares Outstanding As of
  --------------                                  May 25, 1999
  Common Stock                               ------------------------
                                                  77,560,997

<PAGE> 2


                               BORDERS GROUP, INC.

                                      INDEX


Part I - Financial Information

                                                                            Page

   Item 1. Financial Statements                                            1

   Item 2. Management's Discussion and Analysis of
           Financial Condition and Results of
           Operations                                                     10

   Item 3. Quantitative and Qualitative Disclosures about
           Market Risk                                                   N/A

Part II - Other information

   Item 1. Legal Proceedings                                               16

   Item 2. Changes in Securities and Use of Proceeds                       16

   Item 3. Defaults Upon Senior Securities                                 N/A

   Item 4. Submission of Matters to a vote of                              N/A
           Securityholders

   Item 5. Other Information                                               N/A

   Item 6. Exhibits and Reports on Form 8-K                                17


Signatures                                                                 18


<PAGE> 3

                               BORDERS GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in millions except common share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   13 Weeks Ended
                                                 April 25,     April 26,
                                                   1999          1998
                                               ------------- -------------
<S>                                           <C>            <C>

Sales                                               $ 618.7       $ 545.3
Cost of merchandise sold, including
occupancy costs                                       457.2         405.5
                                               ------------- -------------
Gross margin                                          161.5         139.8
Selling, general and administrative expenses          162.0         129.8
Pre-opening expense                                     1.4           0.3
Goodwill amortization                                   0.7           0.7
                                               ------------- -------------
Operating income (loss)                                (2.6)          9.0
Interest expense                                        4.1           2.7
                                               ------------- -------------

Income (loss) before income tax                        (6.7)          6.3
Income tax expense (benefit)                           (2.6)          2.5
                                               ------------- -------------

Net income (loss)                                    $ (4.1)       $  3.8
                                               ============= =============

Earnings per common share data --
   Diluted earnings (loss) per common share         $ (0.05)       $ 0.05
                                               ============= =============
   Diluted weighted average common shares
   Outstanding (in thousands)                        80,317        83,027
                                               ============= =============

   Basic earnings (loss) per common share          $ (0.05)        $ 0.05
                                               ============= =============
   Basic weighted average common shares
   outstanding (in thousands)                        77,345        75,772
                                               ============= =============
</TABLE>

       See accompanying Notes to Unaudited Condensed Consolidated
                              Financial Statements.

<PAGE> 4

                               BORDERS GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
               (Dollars in millions except per common share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                      April 25,   April 26,  January 24,
                                        1999        1998        1999
                                     ----------  ----------  ----------
<S>                                  <C>        <C>          <C>

Assets
Current Assets
Cash                                   $  49.0     $  49.7     $  42.8
Merchandise inventories                1,032.9       926.0     1,019.6
Accounts receivable and other
current assets                            70.6        68.6        70.9
                                     ----------  ----------  ----------
Total Current Assets                   1,152.5     1,044.3     1,133.3
Property and equipment, net of
accumulated depreciation of $348.9,
$293.1 and $331.6 at April 25,
1999, April 26, 1998 and January
24, 1999, respectively                   490.6       390.9       493.8
Other assets and deferred charges         33.6        33.1        33.5
Goodwill, net of accumulated
amortization of $46.7, $43.8, and
$46.0 at April 25, 1999, April 26,
1998 and January 24, 1999,
respectively                             122.3       108.6       106.0
                                     ----------  ----------  ----------
                                      $1,799.0  $ 1,576.9    $ 1,766.6
                                     ==========  ==========  ==========
Liabilities and Stockholders' Equity
Current Liabilities
Short-term debt and capital lease
obligations due within one year        $ 344.6     $ 224.3     $ 134.1
Trade accounts payable                   474.5       485.2       607.2
Accrued payroll and other
liabilities                              180.8       179.8       221.7
Taxes, including income taxes             17.0        22.0        25.8
                                     ----------  ----------  ----------
Total Current Liabilities              1,016.9       911.3       988.8
Long-term debt and capital lease
obligations                                7.0         5.2         6.3
Other long-term liabilities               63.0        51.6        56.4
                                     ----------  ----------  ----------
Total Liabilities                      1,086.9       968.1     1,051.5
                                     ----------  ----------  ----------
Stockholders' Equity
Common stock; 200,000,000 shares
authorized; 77,437,259,  76,163,408
and 77,695,124 issued and
outstanding at April 25, 1999,
April 26, 1998, and January 24,
1999, respectively                       687.2       666.3       687.3
Officers receivable and deferred
compensation                             (6.9)       (5.5)       (7.7)
Accumulated other comprehensive
income                                   (0.5)       (0.1)       (0.9)
Retained earnings (accumulated
deficit)                                  32.3      (51.9)        36.4
                                     ----------  ----------  ----------
Total Stockholders' Equity               712.1       608.8       715.1
                                     ----------  ----------  ----------
                                     $ 1,799.0   $ 1,576.9   $ 1,766.6
                                     ==========  ==========  ==========
</TABLE>

 See accompanying Notes to Unaudited Condensed Consolidated Financial
                              Statements


<PAGE> 5


                               BORDERS GROUP, INC.
        CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE 13 WEEKS ENDED April 25, 1999
                              (Dollars in millions)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                      Deferred
                                    Compensation    Accum.
                                        and         Other
                      Common Stock    Officer    Comprehensive Retained
                     Shares   Amount Receivables    Income     Earnings  Total
                   ---------- ------ -----------  -----------  -------- -------
<S>                <C>        <C>    <C>          <C>          <C>      <C>

Balance at
January 24, 1999   77,695,124 $687.3    $ (7.7)       $ (0.9)    $ 36.4 $ 715.1
                   ---------- ------ ----------   -----------    ------ -------

Net loss                  --     --         --            --       (4.1)   (4.1)
Currency translation
adjustment, net of
taxes                     --     --         --           0.4         --     0.4
                                                                        -------
Comprehensive Income                                                       (3.7)
Issuance of common
stock                 483,187    5.6        --            --         --     5.6
Repurchase and
retirement of common
stock                (741,052)  (5.7)       --            --         --    (5.7)
Change in receivable
and deferred
compensation              --     --        0.8            --         --     0.8
                   ---------- ------ ----------   -----------    ------ -------

Balance at
April 25, 1999     77,437,259 $687.2    $ (6.9)       $ (0.5)    $ 32.3 $ 712.1
                   ========== ====== ==========   ===========    ====== =======
</TABLE>


  See accompanying Notes to Unaudited Condensed Consolidated Financial
                                   Statements.



<PAGE> 6


                               BORDERS GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Dollars in millions)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                13 Weeks Ended
                                              April 25,  April 26,
                                                1999       1998
                                           ----------  -----------
<S>                                        <C>         <C>
Cash provided by (used for):
Operations
Net income (loss)                             $ (4.1)       $  3.8
Adjustments to reconcile net income (loss)
to operating cash flows:
 Depreciation and goodwill amortization          20.6         15.5
 Change in other long-term
 Assets and liabilities                           2.0          1.6
 Cash provided by (used for) current
 Assets and current liabilities:
    Increase in inventories                    (10.3)       (46.9)
    Increase (decrease) in accounts payable   (132.8)          4.5
    Decrease in accrued liabilities            (41.0)       (27.9)
    Decrease in taxes payable                   (8.8)       (40.6)
    Other, net                                    0.8          5.3
                                            ----------  -----------
Net cash used for operations                  (173.6)       (84.7)
                                            ----------  -----------
Investing
Capital expenditures                           (15.5)       (32.0)
Acquisitions, net of cash acquired             (16.5)           --
                                            ----------  -----------
Net cash used for investing                    (32.0)       (32.0)
                                            ----------  -----------
Financing
Net funding from credit facility                210.5         97.0
Issuance of common stock                          5.6          3.4
Repurchase of common stock                       (5.7)          --
Other, net                                        1.4          0.9
                                            ----------  -----------
Net cash provided by financing                  211.8        101.3
                                            ----------  -----------
Net increase/(decrease) in cash and
equivalents                                       6.2        (15.4)
Cash and equivalents at beginning of year        42.8         65.1
                                            ----------  -----------
Cash and equivalents at end of period         $  49.0      $  49.7
                                            ==========  ===========
</TABLE>

    See accompanying Notes to Unaudited Condensed Consolidated
                       Financial Statements


<PAGE> 7

                               BORDERS GROUP, INC.
                          NOTES TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in millions except per common share data)

NOTE 1 - BASIS OF PRESENTATION

  The accompanying  unaudited  condensed  consolidated  financial  statements of
Borders  Group,  Inc. (the  Company) have been prepared in accordance  with Rule
10-01  of  Regulation  S-X and do not  include  all the  information  and  notes
required by generally  accepted  accounting  principles  for complete  financial
statements.  All adjustments,  consisting only of normal recurring  adjustments,
have been made which,  in the opinion of  management,  are  necessary for a fair
presentation  of the results of the interim  periods.  The results of operations
for such interim periods are not necessarily indicative of results of operations
for a full year.  The  unaudited  condensed  consolidated  financial  statements
should  be  read  in  conjunction  with  the  Company's  consolidated  financial
statements  and notes  thereto for the fiscal  year ended  January 24, 1999 (the
1998 consolidated financial statements).

  The Company's  fiscal year ends on the Sunday  immediately  preceding the last
Wednesday in January.  At April 25, 1999, the Company  operated 262  superstores
under the Borders name, including one in Singapore,  one in Australia, and three
in the United Kingdom,  886 mall-based and other bookstores  primarily under the
Waldenbooks  name and 26  bookstores  under the Books  etc.  name in the  United
Kingdom.  The Company  also  operates an Internet  commerce  site under the name
Borders.com.

NOTE 2 - COMMITMENTS AND CONTINGENCIES

  During 1994, the Company  entered into agreements in which leases with respect
to four Borders' locations serve as collateral for certain mortgage pass-through
certificates.   The  mortgage  pass-through  certificates  include  a  provision
requiring the Company to repurchase  the  underlying  mortgage  notes in certain
events,  including the failure by the Company to make payments of rent under the
related  leases,  the failure by Kmart  Corporation  (the  former  parent of the
Company) to maintain required investment grade ratings or the termination of the
guarantee by Kmart of the Company's  obligations under the related leases (which
would require mutual consent of Kmart and Borders).  In the event the Company is
required to repurchase all of the underlying  mortgage notes,  the Company would
be obligated to pay  approximately  $36.6  million.  The Company would expect to
fund this obligation through its Credit Facility. Since February 1995, Kmart has
failed to maintain investment grade ratings, and, therefore, these notes are now
subject to put by the holder. To date, the holder has not exercised its right to
put the notes. The Company does not believe that the note purchase, if required,
would have a material effect on the Company's financial position or earnings.



<PAGE> 8
                               BORDERS GROUP, INC.
                          NOTES TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in millions except per common share data)


   In March 1998, the American  Booksellers  Association  ("ABA") and twenty-six
independent  bookstores  filed a lawsuit in the United States District Court for
the Northern District of California  against the Company and Barnes & Noble Inc.
alleging  violations of the  Robinson-Patman  Act, the  California  Unfair Trade
Practice Act and the  California  Unfair  Competition  Law. The Complaint  seeks
injunctive  and  declaratory  relief;  treble  damages  on behalf of each of the
bookstore plaintiffs,  and, with respect to the California bookstore plaintiffs,
any other damages permitted by California law;  disgorgement of money,  property
and gains  wrongfully  obtained  in  connection  with the  purchase of books for
resale,  or offered  for  resale,  in  California  from March 18, 1994 until the
action is  completed  and  prejudgement  interest on any amounts  awarded in the
action,  as well as attorney fees and costs.  The Company  intends to vigorously
defend the action.

   In August 1998, The Intimate  Bookshop,  Inc. and its owner,  Wallace Kuralt,
have  filed a lawsuit  in the  United  States  District  Court for the  Southern
District of New York against the Company,  Barnes & Noble, Inc.,  Amazon,  Inc.,
certain publishers and others alleging violation of the  Robinson-Patman Act and
other federal law, New York statutes  governing  trade practices and common law.
An  Amended  Complaint  was  subsequently  filed  eliminating  the class  action
allegations  contained in the original Complaint.  The Amended Complaint alleges
that the named  plaintiffs  have  suffered  damages of  $11,250,000  or more and
requests  treble  damages  on  behalf  of the  named  plaintiffs,  as well as of
injunctive and declaratory relief (including an injunction requiring the closure
of all of  defendants'  stores within 10 miles of any location  where  plaintiff
either has or had a retail  bookstore during the four years preceding the filing
of the Complaint,  and prohibiting the opening by defendants of any bookstore in
such  areas  for the next 10  years),  disgorgement  of  alleged  discriminatory
discounts,  rebates, deductions and payments, punitive damages, interest, costs,
attorneys  fees  and  other  relief.  Many  of the  allegations  in the  Amended
Complaint are similar to those contained in the action instituted by the ABA and
26  bookseller  plaintiffs  against  the  Company and Barnes & Noble in March of
1998.  The Company has filed a Motion to Dismiss the action and a hearing on the
Motion is scheduled for July 30, 1999. The Company intends to vigorously  defend
the action.

   On November  20,  1998,  six  independent  booksellers  instituted  an action
entitled  Rae  Richardson  et al Vs Barnes & Noble et al against the Company and
Barnes and Noble in the United States  District Court for the Northern  District
of California  asserting claims, and seeking relief,  similar to claims made and
relief sought in the ABA litigation  described above. Counsel for the plaintiffs
has requested  informally to add approximately 20 additional as yet unidentified
plaintiffs, and the Company has asked for information relating to such request.
The Company intends to vigorously defend the action.

  The Company has not included  any  liability in its  financial  statements  in
connection  with the lawsuits  described  above and has expensed as incurred all
costs to date.

  In addition to the matters  described  above, the Company is from time to time
involved  in or  affected  by  litigation  incidental  to  the  conduct  of  its
businesses.  The Company  does not believe that any such  incidental  litigation
will have a material  adverse  effect on its  liquidity,  financial  position or
results of operations.



<PAGE> 9
                               BORDERS GROUP, INC.
                          NOTES TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in millions except per common share data)


NOTE 3 - FINANCING

  Credit Facility:  The Company has a $425.0 multicurrency credit agreement (the
Credit  Facility) which expires in October,  2002.  Borrowings  under the credit
facility  bear  interest  at a base  rate  or an  increment  over  LIBOR  at the
Company's option. The Credit Facility contains  operating  covenants which limit
the  Company's  ability to incur  indebtedness,  make  acquisitions,  dispose of
assets,  issue or repurchase  its common stock in excess of $100.0 million (plus
any proceeds  and tax benefits  resulting  from stock option  exercises  and tax
benefits  resulting  from  restricted  shares  purchased by  employees  from the
Company),  pay  dividends on its common  stock,  and require the Company to meet
certain  financial  measures  regarding  fixed  charge  coverage,  leverage  and
tangible  net worth.  The Company had  borrowings  outstanding  under the Credit
Facility of $342.1 at April 25, 1999 and $131.9 at January 24, 1999.

  Lease Financing  Facility:  The Company has a $250.0 lease financing  facility
(the Lease Facility) to finance new stores and other property through  operating
leases, which expires in October, 2002. The Lease Facility provides financing to
lessors through loans from a third party lender for up to 95% of a project cost.
It is expected that Lessors will make equity  contributions  approximating 5% of
each  project.  Independent  of its  obligations  as lessee,  the  Company  will
guarantee payment when due of all amounts required to be paid to the third party
lender.  The principal amount  guaranteed is limited to approximately 89% of the
original  cost of a project so long as the  Company is not in default  under the
lease  relating to such project.  There was $137.9  outstanding  under the Lease
Facility at April 25, 1999 and $123.9 at January 24, 1999.

NOTE 4 - COMPREHENSIVE INCOME

  Comprehensive  income  includes all changes in equity  during a period  except
those resulting from investments by or  distributions  to shareholders.  For the
Company,  comprehensive  income for all periods presented consists solely of net
income and  foreign  currency  translation  adjustments  pursuant to FAS No. 52,
"Foreign Currency Translation", as follows:

<TABLE>
<CAPTION>

                                              13 Weeks Ended
                                           April 25,      April 26,
                                             1999           1998
                                           ----------    ----------
<S>                                        <C>           <C>

Net income (loss)                             $ (4.1)       $ 3.8
Other comprehensive income:
  Foreign currency
   translation adjustments                       0.6         1.3
  Related tax effect                            (0.2)       (0.5)
                                           ----------  ----------
                                                 0.4         0.8
                                           ----------  ----------
Total comprehensive income                    $ (3.7)       $ 4.6
                                           ==========  ==========
</TABLE>


<PAGE> 10

                               BORDERS GROUP, INC.
                          NOTES TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in millions except per common share data)


NOTE 5 - SEGMENT INFORMATION

   The  Company  is  organized  based  upon the  following  operating  segments:
domestic Borders stores,  international  Borders and Books etc.  stores,  Walden
stores, and online retailing. These operating segments have been aggregated into
two reporting segments: stores and online retailing.  Although stores and online
retailing share a number of economic characteristics,  such as the nature of the
merchandise  sold, the methods of merchandise  procurement used, and the type of
customer for the  merchandise  sold, they differ in their method of distributing
merchandise to customers.

  Segment data includes charges allocating all  corporate-headquarters  costs to
each  segment.  The  Company  evaluates  the  performance  of its  segments  and
allocates resources to them based on anticipated future contribution.

<TABLE>
<CAPTION>
                                      13 Weeks Ended
                                  April 25,    April 26,
                                     1999        1998
                                  -----------  ----------
<S>                               <C>          <C>
Sales:
   Stores                            $ 615.5     $ 545.3
   Borders.com                           3.2           -
                                  -----------  ----------
   Total sales                       $ 618.7     $ 545.3
                                  ===========  ==========

Net income (loss):
   Stores                              $ 0.2       $ 5.0
   Borders.com                         (4.3)       (1.2)
                                  -----------  ----------
   Total net income (loss)           $ (4.1)       $ 3.8
                                  ===========  ==========
</TABLE>


<TABLE>
<CAPTION>
                                  April 25,    April 26,
                                     1999        1998
                                  -----------  ----------
<S>                               <C>          <C>

Total assets:
   Stores                          $ 1,748.7   $ 1,543.6
   Borders.com                          50.3        33.3
                                  -----------  ----------
   Total assets                    $ 1,799.0   $ 1,576.9
                                  ===========  ==========
</TABLE>

<PAGE> 11

                               BORDERS GROUP, INC.
                          NOTES TO UNAUDITED CONDENSED
                        CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in millions except per common share data)


NOTE 6 - CHANGES IN ACCOUNTING PRINCIPLES

  Effective  January 24, 1999,  the Company  adopted the  American  Institute of
Certified Public  Accountants'  Statement of Position (SOP) 98-5,  "Reporting on
the Costs of Start-Up Activities".  This SOP requires store pre-opening costs to
be expensed as incurred. The Company had expensed store pre-opening costs in the
first fiscal month of a store's operations. This SOP does not permit restatement
of amounts recorded prior to the adoption of the SOP: however,  adoption of this
SOP did not have a material impact on the company's financial position,  results
of operations, or liquidity in the first quarter of 1999.

  In the first quarter of 1999, the Company shortened the estimated  depreciable
lives of certain  categories of personal  computer  equipment to three years and
extended the estimated  depreciable  lives of certain  store  fixtures up to ten
years.  The Company  believes that these changes better reflect the useful lives
of  these  assets.   The  Company  will  utilize  the  new   depreciable   lives
prospectively.  These  changes did not have a material  impact on the  Company's
financial position or results of operations in the first quarter of 1999 and are
not expected to have a material impact for the full year.


<PAGE> 12


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
        RESULTS OF OPERATIONS

General

  The Company, through its subsidiaries,  is the second largest operator of book
superstores and the largest operator of mall-based bookstores in the world based
upon both sales and number of stores.  At April 25, 1999,  the Company  operated
262  superstores  under the Borders name,  including  one in  Singapore,  one in
Australia,  and three in the United Kingdom, 886 mall-based and other bookstores
primarily under the Waldenbooks name and 26 bookstores under the Books etc. name
in the United Kingdom. The Company also operates an Internet commerce site under
the name  Borders.com.  Borders is one of the nation's largest  specialty coffee
retailers with cafe operations in nearly all of its superstores.

  The Company's  first quarters of 1999 and 1998 consisted of the 13 weeks ended
April 25, 1999 and April 26, 1998, respectively.

Results of Operations

  The following table presents the Company's  statement of operations data, as a
percentage  of sales,  for the  periods  indicated  (data for the 13 weeks ended
April 25,  1999  exclude  the  non-recurring  charge  related  to Mr.  Pfeffer's
departure):

<TABLE>
<CAPTION>
                                      13 Weeks Ended
                                 April 25,      April 26,
                                   1999           1998
                                ------------   ------------
<S>                              <C>           <C>
Sales                                 100.0 %        100.0 %
Cost of merchandise sold,
including occupancy costs              73.9           74.4
                                ------------   ------------
Gross margin                           26.1           25.6
Selling, general and
administrative expenses                25.3           23.8
Pre-opening expense                     0.2              -
Goodwill amortization                   0.1            0.1
                                ------------   ------------
Operating income                        0.5            1.7
Interest expense                        0.7            0.5
                                ------------   ------------
Income before income taxes            (0.2)            1.2
Income tax expense                    (0.1)            0.5
                                ------------   ------------
Net income (loss)                     (0.1) %          0.7 %
                                ============   ============
</TABLE>


<PAGE> 13


Store Activity

The Company's store activity is summarized below:
<TABLE>
<CAPTION>
                                                            Year
                                   Quarter Ended            Ended
                              April 25,     April 26,     January 24,
                                 1999         1998          1999
                             -----------  ------------   -----------
<S>                          <C>          <C>            <C>

Borders Superstores
Beginning number of stores          250           203          203
Openings                             12             3           47
                             -----------  ------------   -----------
Ending number of stores             262           206          250
                             ===========  ============   ===========

Walden Mall Bookstores
Beginning number of stores          900           923          923
Openings                              8             4           16
Closings                           (22)          (24)         (39)
                             -----------  ------------   -----------
Ending number of stores             886           903          900
                             ===========  ============   ===========
</TABLE>



13 Weeks Ended April 25, 1999 and April 26, 1998

  Store sales in the first quarter of 1999 were $615.5 million, a $70.2 million,
or 12.9%,  increase  over  first  quarter  1998  sales of $545.3  million.  This
increase  reflects  a $74.4  million,  or  22.2%,  increase  in  Borders'  sales
resulting from new store openings and a comparable store sales increase of 3.3%.
This increase was partially  offset by a decline in Walden sales of $5.2 million
due to a lower number of stores and a comparable store sales decrease of 2.3%.

  Gross  margin as a  percentage  of sales was 26.1% in 1999 versus 25.6% in the
first quarter of 1998. The increase  primarily  reflects a higher mix of Borders
stores which have a lower percentage occupancy cost.

  As a percentage of sales, SG&A expense  (excluding the  non-recurring  pre-tax
charge of $5.5 million  related to Mr.  Pfeffer's  departure)  was 25.3% in 1999
versus  23.8% in the first  quarter  of 1998.  The  increase  in SG&A is largely
related to Borders.com expenses and international initiatives.

  Pre-opening  expense in the first quarter of 1999 was $1.4 million versus $0.3
million from the same period in 1998.  Pre-opening expense consists  principally
of grand-opening  advertising  expense and store payroll related to the opening,
and is expensed as incurred. Pre-opening expense per store varies primarily as a
result  of  differing  levels of grand  opening  advertising,  depending  on the
presence of the Company and its  competitors in the market and differing  levels
of labor costs  associated with  merchandising  the store. The Company opened 12
Borders superstores and 8 Walden stores in the first quarter of 1999 as compared
to 3 Borders superstores and 4 Walden stores in the first quarter of 1998.

<PAGE> 14

  Goodwill amortization was $0.7 million in the first quarter of 1999, unchanged
from the same period in 1998.

  Interest  expense was $4.1 million in the first quarter of 1999 as compared to
$2.7  million in 1998.  The  increase of $1.4  million is  primarily  related to
interest on borrowings to fund the repurchase of common stock and the opening of
domestic and international superstores.

  Income  tax  benefit  (excluding  the  non-recurring  charge  related  to  Mr.
Pfeffer's  departure)  in the first quarter of 1999 was $0.5 million as compared
to income tax expense of $2.5 million in 1998.

Liquidity and Capital Resources

  The  Company's  principal  capital  requirements  are to fund working  capital
needs, the opening of new stores,  the  refurbishment  and expansion of existing
stores and its Borders.com business.

  Net cash used for  operations for the 13 weeks ended April 25, 1999 was $173.6
million as compared to $84.7  million in the  corresponding  period in the prior
year.  The current year  operating  cash inflows  primarily  reflects  operating
results, net of non-cash depreciation and amortization expense of $20.6 million.
Operating  cash  outflows for the period were  primarily the result of inventory
purchases and a decrease in accounts payable during the period.

  Net cash used for  investing  for the first 13 weeks of 1999 was $32.0 million
as  compared  to $32.0  million  in the  first 13 weeks of 1998,  and  primarily
represents capital  expenditures for new stores and the acquisition of All Wound
Up, an operator of seasonal kiosks.

  Net cash  provided  by  financing  in the  first  13 weeks of 1999 was  $211.8
million  versus $101.3  million in the first 13 weeks of 1998. Net cash provided
by financing resulted primarily from net borrowings under the credit facility.

  On a  consolidated  basis,  the Company  expects its capital  requirements  to
increase as a result of its expansion program for its Borders  superstores (both
domestic and international) and Borders.com investment.

  The Company  anticipates the need for additional  seasonal  borrowing capacity
above and beyond the capacity of the Credit  Facility and Lease Facility to fund
its  anticipated  capital  requirements.   The  Company  expects  to  have  such
additional capacity in place by the end of the second quarter.

  The Company has a $425.0  multicurrency credit agreement (the Credit Facility)
which  expires in  October,  2002.  Borrowings  under the Credit  Facility  bear
interest at a base rate or an increment over LIBOR at the Company's option.  The
Credit Facility contains  operating  covenants which limit the Company's ability
to incur indebtedness, make acquisitions, dispose of assets, issue or repurchase
its common stock in excess of $100.0 million (plus any proceeds and tax benefits
resulting from stock option exercises and tax benefits resulting from restricted
shares  purchased by employees  from the  Company),  pay dividends on its common
stock,  and require the Company to meet  certain  financial  measures  regarding
fixed  charge  coverage,  leverage  and  tangible  net worth.  The  Company  had
borrowings outstanding under the credit facility of $342.1 at April 25, 1999 and
$131.9 at January 24, 1999.
<PAGE> 15

  The Company has a $250.0 million lease financing facility (the Lease Facility)
to finance new stores and other property through  operating leases which expires
in October,  2002. The Lease Facility will provide  financing to lessors through
loans from a third party lender for up to 95% of a project  cost. It is expected
that lessors will make equity  contributions  approximating  5% of each project.
Independent of its obligations as lessee,  the Company  guarantees  payment when
due of all amounts required to be paid to the third party lender.  The principal
amount guaranteed will be limited to approximately 89% of the original cost of a
project,  so long as the Company is not in default  under the lease  relating to
such project.

  There were 39 properties financed through the Lease Facility,  with a financed
value of $137.9 million, at April 25, 1999.  Management believes that the rental
payments for  properties  financed  through the lease facility may be lower than
those which the Company could obtain elsewhere due to, among other factors,  (i)
the  lower  borrowing  rates  available  to the  Company's  landlords  under the
facility,  and (ii) the fact the rental payments for properties financed through
the  facility  do not  include  amortization  of the  principal  amounts  of the
landlords'  indebtedness related to the properties.  Rental payments relating to
such properties will be adjusted when permanent financing is obtained to reflect
the interest rates available at the time of the refinancing and the amortization
of principal.

  During 1994, the Company  entered into agreements in which leases with respect
to four Borders' locations serve as collateral for certain mortgage pass-through
certificates.   The  mortgage  pass-through  certificates  include  a  provision
requiring the Company to repurchase  the  underlying  mortgage  notes in certain
events,  including the failure by the Company to make payments of rent under the
related  leases,  the failure by Kmart  Corporation  (the  former  parent of the
Company) to maintain required investment grade ratings or the termination of the
guarantee by Kmart of the Company's  obligations under the related leases (which
would require mutual consent of Kmart and Borders).  In the event the Company is
required to repurchase all of the underlying  mortgage notes,  the Company would
be obligated to pay  approximately  $36.6  million.  The Company would expect to
fund this obligation through its Credit Facility. Since February 1995, Kmart has
failed to maintain investment grade ratings, and, therefore, these notes are now
subject to put by the holder. To date, the holder has not exercised its right to
put the notes.

  The Company  currently has a share repurchase  program in place with remaining
authorization to repurchase approximately $65.8 million of its common stock.

Other Matters

   Year 2000 Issue

  The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define a specific year. Absent corrective  actions, a
computer  program that has  date-sensitive  software may  recognize a date using
"00" as the year 1900  rather  than the year 2000.  This could  result in system
failures  or  miscalculations  causing  disruptions  to various  activities  and
operations.

  The Company initiated  assessments in prior years to identify the work efforts
required to assure that systems  supporting  the business  successfully  operate
beyond  the turn of the  century.  The  scope of this  work  effort  encompasses
information technology systems,  systems utilizing embedded technology,  such as
microcontrollers, and the readiness of external third parties, such as suppliers
and service providers.

<PAGE> 16
      Financial and Non-Financial  Information  Technology Systems These systems
      encompass both application  software and operating  system  software.  The
      Company has  completed  its  assessment,  renovation,  and  validation  of
      potential problem areas concerning  application  software.  Implementation
      (the final stage) of application  software based in the Company's  stores,
      distribution centers and headquarters is complete.  The Borders.com system
      was designed with Year 2000 compliant data  structures.  Testing to verify
      that Year 2000  standards  within  Borders.com  have  been  maintained  is
      expected to be completed by the end of the second quarter.  The assessment
      and renovation of operating system software has been completed. Validation
      and implementation of operating system software modifications are expected
      to be completed by the end of the second quarter of fiscal 1999.

      Embedded Technology Systems
      The Company has completed its assessment of the potential risks associated
      with embedded  technology  systems,  such as HVAC,  elevators and security
      systems at the Company's stores,  distribution  centers, and headquarters.
      This involved  inventorying all equipment utilizing embedded technology by
      vendor and model, and contacting the necessary vendors with regards to the
      compliance  status  of  each  item.  Services  or  equipment  provided  by
      non-compliant  vendors  identified  through the assessment process will be
      upgraded to  compliant  versions  to the extent  that the  Company  cannot
      correct identified  problem areas internally.  This step is expected to be
      completed by the end of the second quarter of fiscal 1999.

      Suppliers and Service Providers
      The Company  relies on numerous third parties to provide  merchandise  and
      services.  As such,  attention has been focused on  compliance  attainment
      efforts of vendors.  Key parties have been contacted for  clarification of
      their Year 2000 plans and their compliance status. Merchandise or services
      provided  by  non-compliant  vendors  identified  through  the  assessment
      process will be evaluated for  potential  alternative  arrangements.  Such
      arrangements may include less reliance on electronic  ordering or sourcing
      through alternative  distribution  channels to the extent that merchandise
      is available through such channels.

  Notwithstanding  the substantive  work efforts  described  above,  the Company
could  potentially  experience  disruptions  to  some  aspects  of  its  various
activities and operations,  including those resulting from non-compliant systems
utilized by  unrelated  third  party  business  entities.  The Company is in the
process of developing business contingency plans in order to attempt to mitigate
the  extent  of  potential  disruption  to  business  operations.   The  Company
anticipates that development of such contingency  plans will be completed by the
end of the second quarter of fiscal 1999. The Company will continuously  monitor
the adequacy of its contingency plans throughout the remainder of fiscal 1999.

   Costs of  addressing  the Year 2000 Issue have not been material to date and,
based on  preliminary  information  gathered  to date from the  Company  and its
vendors,  are not currently  expected to have a material  adverse  impact on the
Company's  financial  position,  results of  operations  or cash flows in future
periods.  However,  if the  Company or its  vendors  are unable to resolve  such
processing  issues in a timely manner,  it could result in a material  financial
risk,  including loss of revenue,  substantial  unanticipated  costs and service
interruptions.

<PAGE> 17

Forward-Looking Statements

  This  Quarterly  Report on Form 10-Q  contains  forward-looking  statements as
defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements  reflect   management's   current  expectations  and  are  inherently
uncertain.   The  Company's  actual  results  may  differ   significantly   from
management's  expectations.  Exhibit 99.1 to this report,  "Cautionary Statement
under the Private  Securities  Litigation  Reform Act of 1995",  identifies  the
forward-looking  statements and describes some, but not all, of the factors that
could cause these differences.


<PAGE> 18

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

  The  Company's  Form 10-K Annual  Report for the fiscal year ended January 24,
1999 describes three pending lawsuits against the Company  asserting  anti-trust
and other  claims.  An  adverse  judgment  against  the  Company in any of these
matters could have a material adverse effect on the Company. There have not been
any material  developments in these matters during the fiscal quarter covered by
this Report  except,  as follows:  (i) the Company has filed a Motion to Dismiss
the lawsuit filed in the United States District Court for the Southern  District
of New York by the  Intimate  Bookshop,  Inc.,  and a hearing  on the  Company's
motion is scheduled  for July 30, 1999;  and (ii) counsel for the  plaintiffs in
Rae  Richardson  et al Vs Barnes & Noble et al,  the  action  instituted  by six
independent  booksellers  in the United States  District  Court for the Northern
District  of  California,  has  requested  informally  to add  approximately  20
additional  as yet  unidentified  plaintiffs,  and the  Company  has  asked  for
information relating to such request.

  In addition to the matters  described  above, the Company is from time to time
involved  in or  affected  by  litigation  incidental  to  the  conduct  of  its
businesses.  The Company  does not believe that any such  incidental  litigation
will have a material  adverse  effect on its  liquidity,  financial  position or
results of operations.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    On February 1, 1999, the Company  issued:  (i) options to Mr.  DiRomualdo to
purchase  125,763 shares with an exercise price of $17.125 in lieu of salary and
bonus in the aggregate  amount of $686,666;  and (ii) options to Mr.  Mrkonic to
purchase  94,332 shares with an exercise  price of $17.235 in lieu of salary and
bonus in the aggregate amount of $515,000.  These transactions involved an offer
solely to executive officers of the Company.  Reliance was placed by the Company
upon the exemption from registration under Section 4(2) of the Securities Act of
1933, which exempts transactions by an issuer not involving a public offering.

<PAGE> 19

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

(a)  Exhibits:

     27.0  Financial Data Schedule

     99.1  Cautionary  Statement  under the Private  Securities  Litigation
           Reform  Act  of  1995  -  "Safe   Harbor"  for   Forward-Looking
           Statements.


<PAGE> 20

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereto duly authorized.

                               BORDERS GROUP, INC.
                               -------------------
                                  (Registrant)


Date: June 8, 1999                  By:        /S/
                                       -----------------------
                                       Kenneth E. Scheve
                                       Senior Vice President, Chief
                                       Financial Officer and Treasurer
                                       (Principal Financial and
                                        Accounting Officer)