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 October 22, 2000

                                       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
          (State or other jurisdiction of incorporation or organization)

                                   38-3196915
                                (I.R.S. Employer
                                 Identification
                                      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
      --------------                        November 28, 2000
      Common Stock                       ---------------------
                                                78,611,784

<PAGE>

                              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                                              11

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

Part II - Other information

   Item 1.   Legal Proceedings                                       17

   Item 2.   Changes in Securities and Use of Proceeds              N/A

   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                        18


Signatures                                                           19



<PAGE>
<TABLE>


                              BORDERS GROUP, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in millions except common share data)
                                  (Unaudited)
<CAPTION>
                                                        13 Weeks Ended
                                                  October 22,     October 24,
                                                     2000             1999
                                                ---------------  ---------------
<S>                                             <C>              <C>

Sales                                             $     703.8      $     656.3
Cost of merchandise sold, including
occupancy costs                                         527.2            483.7
                                                ---------------  ---------------

Gross margin                                            176.6            172.6
Selling, general and administrative expenses            176.8            167.0
Pre-opening expense                                       2.3              2.0
Goodwill amortization                                     0.9              1.0
                                                ---------------  ---------------

Operating income (loss)                                  (3.4)             2.6
Interest expense                                          4.8              5.1
                                                ---------------  ---------------

Loss before income tax                                   (8.2)            (2.5)
Income tax benefit                                       (3.2)            (1.0)
                                                ---------------  ---------------

Net loss                                          $      (5.0)     $      (1.5)
                                                ===============  ===============

Earnings per common share data --
   Diluted loss per common share                  $      (0.06)    $     (0.02)
                                                ===============  ===============
   Diluted weighted average common shares
   outstanding (in thousands)                           78,579         77,618
                                                ===============  ===============

   Basic loss per common share                    $      (0.06)    $     (0.02)
                                                ===============  ===============
   Basic weighted average common shares
   outstanding (in thousands)                           78,579         77,618
                                                ===============  ===============
</TABLE>

           See accompanying Notes to Unaudited Condensed Consolidated
                             Financial Statements.



<PAGE>
<TABLE>

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

                                                       39 Weeks Ended
                                                  October 22,     October 24,
                                                     2000             1999
                                                ---------------  ---------------
<S>                                             <C>              <C>
Sales                                             $   2,084.4      $   1,906.0
Cost of merchandise sold, including
occupancy costs                                       1,552.5          1,409.8
                                                ---------------  ---------------

Gross margin                                            531.9            496.2
Selling, general and administrative expenses            525.2            487.7
Pre-opening expense                                       4.7              5.6
Goodwill amortization                                     2.7              2.6
                                                ---------------  ---------------

Operating income (loss)                                  (0.7)             0.3
Interest expense                                         11.6             13.8
                                                ---------------  ---------------

Loss before income tax                                  (12.3)           (13.5)
Income tax benefit                                       (4.8)            (5.3)
                                                ---------------  ---------------

Net loss                                          $      (7.5)     $      (8.2)
                                                ===============  ===============

Earnings per common share data --
   Diluted loss per common share                  $      (0.10)    $     (0.11)
                                                ===============  ===============
   Diluted weighted average common shares
   outstanding (in thousands)                           78,307         77,613
                                                ===============  ===============

   Basic loss per common share                    $      (0.10)    $     (0.11)
                                                ===============  ===============
   Basic weighted average common shares
   outstanding (in thousands)                           78,307         77,613
                                                ===============  ===============
</TABLE>


      See accompanying Notes to Unaudited Condensed Consolidated Financial
                                  Statements.


<PAGE>
<TABLE>

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

                                            October 22, October 24,  January 23,
                                              2000         1999        2000
                                           ------------ ----------- ------------
<S>                                        <C>          <C>         <C>

                  ASSETS
Current Assets:
  Cash                                       $    56.4    $    48.8   $    41.6
  Merchandise inventories                      1,386.5      1,241.2     1,077.7
  Accounts receivable and other current
    assets                                        78.4         64.2        78.9
                                           ------------ ----------- ------------
      Total Current Assets                     1,521.3      1,354.2     1,198.2
Property and equipment, net of accumulated
  depreciation of $456.8, $380.1 and
  $395.4 at October 22, 2000, October 24,
  1999 and January 23, 2000, respectively        566.4        532.7       558.2
Other assets and deferred charges                 35.3         33.9        36.6
Goodwill, net of accumulated amortization
  of $52.2, $48.6 and $49.5 at October 22,
  2000, October 24, 1999 and January 23,
  2000, respectively                             110.2        122.1       121.8
                                           ------------ ----------- ------------
      Total Assets                           $ 2,233.2    $ 2,042.9   $ 1,914.8
                                           ============ =========== ============
   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt and capital lease
   obligations due within one year           $   386.7    $   376.2   $   136.1
  Trade accounts payable                         754.1        697.3       580.4
  Accrued payroll and other liabilities          183.5        181.5       232.2
  Taxes, including income taxes                   30.0         18.0        79.2
                                           ------------ ----------- ------------
      Total Current Liabilities                1,354.3      1,273.0     1,027.9
Long-term debt and capital lease
 obligations                                      15.6          5.7        16.2
Other long-term liabilities                       70.1         65.4        68.1
                                           ------------ ----------- ------------
      Total Liabilities                        1,440.0      1,344.1     1,112.2
                                           ------------ ----------- ------------
Stockholders' Equity:
Common stock: 300,000,000 shares
  authorized; 78,501,289,  77,169,700,and
  77,687,829 issued and outstanding at
  October 22, 2000, October 24, 1999, and
  January 23, 2000, respectively                 684.0        675.2       679.6
Officers receivable and deferred
 compensation                                     (1.2)        (4.7)       (3.9)
Accumulated other comprehensive income            (8.8)         0.1         0.2
Retained earnings                                119.2         28.2       126.7
                                           ------------ ----------- ------------
      Total Stockholders' Equity                 793.2        698.8       802.6
                                           ------------ ----------- ------------
      Total Liabilities & Stockholders'
          Equity                             $ 2,233.2    $ 2,042.9   $ 1,914.8
                                           ============ =========== ============
</TABLE>

 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements



<PAGE>
<TABLE>

                               BORDERS GROUP, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE 39 WEEKS ENDED OCTOBER 22, 2000
                             (Dollars in millions)
                                  (Unaudited)


<CAPTION>

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

Balance at January 23,
2000                    77,687,829 $ 679.6  $     (3.9) $       0.2  $  126.7  $ 802.6
                        ---------- -------  ----------  -----------  --------  -------
Net loss                      --      --          --           --        (7.5)    (7.5)
Currency translation
 adjustment                    --     --          --           (9.0)     --       (9.0)
                                                                               -------
Comprehensive loss                                                               (16.5)
Issuance of common
 stock                  1,290,063     11.6        --           --        --       11.6
Repurchase and
 retirement of common
 stock                   (476,603)    (7.2)       --           --        --       (7.2)
Change in receivable
 and Deferred compen-
 sation                        --     --           2.7         --        --        2.7
                        ---------- -------  ----------  -----------  --------  -------

Balance at October 22,
2000                    78,501,289 $ 684.0  $     (1.2) $      (8.8)  $ 119.2  $ 793.2
                        ========== =======  ==========  ===========  ========  =======

</TABLE>


      See accompanying Notes to Unaudited Condensed Consolidated Financial
                                  Statements.




<PAGE>
<TABLE>

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

<CAPTION>

                                                         39 Weeks Ended

                                                    October 22,    October 24,
                                                      2000           1999
                                                   ------------  -------------
<S>                                                  <C>           <C>

Cash provided by (used for):
Operations
Net loss                                             $     (7.5)   $     (8.2)
Adjustments  to  reconcile  net loss to  operating
cash flows:
  Depreciation and goodwill amortization                   70.0          60.8
  Change in other long-term assets and liabilities          4.9           2.8
  Cash  provided by (used for) current  assets and
   current liabilities:
   Increase in inventories                               (314.9)       (218.6)
   Increase in accounts payable                           176.4          90.0
   Decrease in accrued liabilities                        (47.2)        (38.1)
   Decrease in taxes payable                              (49.8)         (7.8)
   Other, net                                              --             7.2
                                                   ------------  -------------
Net cash used for operations                             (168.1)       (111.9)
Investing
Capital expenditures                                      (86.0)        (96.2)
Acquisitions, net of cash acquired                         --           (16.5)
                                                   ------------  -------------
Net cash used for investing                               (86.0)       (112.7)
Financing
Net funding from credit facility                          263.8         242.1
Issuance of common stock                                   11.6           9.3
Repurchase of common stock                                 (7.2)        (21.4)
Other, net                                                  0.9           0.6
                                                   ------------  -------------
Net cash provided by financing                            269.1         230.6
Effect of exchange rates on cash and equivalents           (0.2)         --
                                                   ------------  -------------
Net increase in cash and equivalents                       14.8           6.0
Cash and equivalents at beginning of year                  41.6          42.8
                                                   ------------  -------------
Cash and equivalents at end of period                $     56.4    $     48.8
                                                   ============  =============
</TABLE>

    See accompanying Notes to Unaudited Condensed Consolidated Financial
                                 Statements




<PAGE>

                              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 23,
2000.

   The Company's fiscal year ends on the Sunday  immediately  preceding the last
Wednesday  in  January.   At  October  22,  2000,   the  Company   operated  337
superstores  under the Borders name,  including nine in the United Kingdom,  two
in  Australia,  and one each in  Singapore  and New  Zealand.  The Company  also
operated 890 mall-based and other  bookstores  primarily  under the  Waldenbooks
name,  and 31 bookstores  under the Books etc. name in the United  Kingdom.  The
Company,  through  its  subsidiary  Borders  Online,  Inc.,  is also  an  online
retailer  of books,  music and  video  through  the  operation  of its  Internet
commerce site, Borders.com.

   Unexercised  employee  stock options to purchase  15.7 million  common shares
as of  October  22,  2000  were not  included  in the  weighted  average  shares
outstanding  calculation  for the 13 and 39 weeks ended October 22, 2000 because
to do so would have been antidilutive.

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. The Company
would expect to fund this obligation through its Credit Facility.

   In  March  1998,  the  American   Booksellers   Association  ("ABA")  and  26
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  Act. 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  plaintiffs  have
provided  a  report  estimating  damages  against  the  Company,   exclusive  of
interest,  as  follows:  (i)  between an  aggregate  of  approximately  $2.8 and
approximately  $3.3 (before  trebling) with respect to the  Robinson-Patman  Act
claims  of the  26  independent  bookseller  plaintiffs,  and  (ii)  between  an
aggregate  of  approximately  $5.5 and  approximately  $9.5 with  respect to the
disgorgement  claims  under  California  law for  the  geographic  areas  of the
California   plaintiffs.   The  Company's  pleadings  in  the  action  deny  any
liability  to  plaintiffs,  and  the  Company  disputes  plaintiffs'  claims  of
damages.  On  November  16,  the court  granted  the motion of the  Company  and
Barnes & Noble to  dismiss  the  disgorgement  claims  brought  by the ABA under
California law on behalf of  independent  booksellers in the state of California
who are not  named in the  litigation.  The  trial  is  scheduled  for  April 9,
2001.  The Company intends to vigorously defend the action.


<PAGE>

     In August 1998, The Intimate  Bookshop,  Inc.  (cIntimate")  and its owner,
Wallace  Kuralt,  filed a lawsuit in the United  States  District  Court for the
Southern  District of New York against the Company,  Barnes & Noble,  Inc.,  and
others alleging violation of the Robinson-Patman Act and other federal laws, New
York  statutes  governing  trade  practices  and  common  law.  In  response  to
Defendants'  Motion to Dismiss the  Complaint,  plaintiff  Kuralt  withdrew  his
claims and plaintiff Intimate voluntarily  dismissed all but its Robinson-Patman
claims.   Intimate   recently  filed  a  Second  Amended  Complaint  limited  to
allegations  of  violation  of  the  Robinson-Patman  act.  The  Second  Amended
Complaint  alleges  that  Intimate  has  suffered  $11.3 or more in damages  and
requests treble damages,  injunctive and declaratory  relief,  interest,  costs,
attorneys  fees and other  unspecified  relief.  Many of the  allegations in the
Second Amended Complaint are similar to those contained in the action instituted
by the ABA and 26 bookseller  plaintiffs against the Company and Barnes & Noble,
Inc. in March, 1998. The Company intends to vigorously defend the action.

   In April 2000, two former  employees,  Marissa  Everett and Terry  Blagsvedt,
individually  and on  behalf  of a  purported  class,  filed an  action  against
Borders in the Superior  Court of  California  for the County of San  Francisco.
On August 17, 2000,  the Court entered a Tentative  Order  dismissing  the class
action,  conversion  and  punitive  damage  aspects  of  the  Complaint  on  the
following  grounds:  (i)  individual  issues will  predominate  and,  therefore,
class  treatment  is not  warranted,  and (ii) the  plaintiffs  failed to allege
facts  sufficient  to state a cause  of  action  for  conversion,  and  punitive
damages could only be awarded on the  conversion  claims in the  Complaint.  The
Court stated that the plaintiffs  would be entitled to limited  discovery on the
class  action  aspects  of the  case,  and  that  they  could  file  an  amended
complaint  asserting  more  specifically  the basis for class action status upon
the conclusion of that  discovery.  An Amended  Complaint has been filed by four
named  plaintiffs,  individually  and on behalf of a purported class  consisting
of all  current  and  former  employees  who  worked as  assistant  managers  in
Borders  stores in the State of  California  at any time between  April 10, 1996
and the present.  The Amended Complaint  alleges that the individual  plaintiffs
and the  purported  class  members  worked hours for which they were entitled to
receive,  but did not receive,  overtime  compensation under California law, and
that they were  classified  as  "exempt"  store  management  employees  but were
forced to work more than 50% of their  time in  non-exempt  tasks.  The  Amended
Complaint  alleges  violations of the  California  Labor Code and the California
Business and  Professions  Code.  The relief sought  includes  compensatory  and
punitive damages,  penalties,  preliminary and permanent  injunctions  requiring
Borders to pay overtime  compensation  as required under  California and Federal
law,  prejudgment  interest,  costs and attorneys  fees and such other relief as
the court deems proper.  The Company  intends to  vigorously  defend the action,
including again contesting the certification of the action as a class action.

   On May 31, 2000,  Keith  Markowitz  instituted an action in the United States
District Court for the Eastern  District of  Pennsylvania  as a purported  class
action against Sony Music  Entertainment Inc. ("Sony"),  Warner-Elektra-Atlantic
Corporation  ("WEA"),  EMI  Music  Distribution   ("EMI"),  BMG  Music  ("BMG"),
Universal  Music & Video Corp.  ("UMVD"),  Wal Mart Stores,  Inc.,  ("Wal Mart")
and Borders,  Inc.,  ("Borders",  a subsidiary  of the  Company).  The purported
Plaintiff Class is composed of all similarly  situated  purchasers who since May
31, 1996 (the "Class  Period")  purchased  compact  discs of  prerecorded  music
distributed  and/ or manufactured by defendants.  Wal Mart and Borders are named
as  defendants  individually  and as  representatives  of a purported  Defendant
Class  consisting  of all  retailers  and other  distributors  of compact  discs
produced by  defendants  Sony,  WEA, EMI, BMG, and UMVD during the Class Period,
and who  conspired  with  Sony,  WEA,  EMI,  BMG,  and/or  UMVD to carry out the
unlawful  conduct  alleged in the  complaint.  The complaint  alleges that Sony,
WEA, EMI, BMG, and UMVD each had agreements  with retailers  setting out minimum
advertised  price policies and the benefits  conferred on retailers for adhering
to such policy,  and that such  agreements  amounted to vertical  agreements  in
restraint  of trade  fixing a minimum  price  for  prerecorded  music  products,
including  CDs.  The  complaint  further  alleges  that the  alleged  agreements
violated  of the  Sherman  Anti-Trust  Act  and  caused  the  plaintiffs  to pay
supra-competitive  prices  for  the  CDs  they  purchased.   Plaintiffs  seek  a
permanent   injunction,    treble   damages,    attorneys'   fees,   costs   and
disbursements,  pre- and  post-judgment  interest  and such other  relief as the
court may deem as  appropriate.  Borders  denies the  allegations  of wrongdoing
and intends to vigorously defend this litigation.


<PAGE>

   On October 10, 2000, Edward Michael O'Brien and Saviorg  Corporation,  as pro
se litigants,  instituted an action in the United States  District Court for the
Central  District of  California  against Time  Warner,  Inc.  ("Time  Warner"),
Warner  Music  Group  ("Warner  Music"),   Warner-Electra-Atlantic   Corporation
("Warner-Electra"),  Warner  Bros.  Records,  Inc.  ("Warner  Bros."),  Atlantic
Recording  Corp.  ("Atlantic"),  Elektra  Entertainment  Group,  Inc.  ("Elektra
Entertainment"),  Rhino Entertainment  Company ("Rhino"),  Wal-Mart Stores, Inc.
("Wal-Mart"),  K-Mart  Corporation  ("K-Mart"),  the Company  and Morning  Glory
Music ("Morning Glory").  The Complaint,  which contains  allegations similar to
those made in the Markowitz  action  described in the Company's Form 10-Q Report
for  the   quarter   ended  April  23,   2000,   alleges   that  Warner   Music,
Warner-Electra,   Warner  Bros.,   Atlantic,   Elektra   Entertainment,   Rhino,
Wal-Mart,  the Company and Morning Glory  conspired  with  defendant Time Warner
to implement and maintain Time Warner's  minimum  advertised  pricing  policies,
and that  those  agreements  were in  restraint  of trade and  illegally  fixed,
raised,  maintained  and/or  stabilized,  at artificial  noncompetitive  levels,
prices for prerecorded music products,  including  compact disks,  cassettes and
albums.  The  Complaint  asserts that as a result of these  alleged  agreements,
plaintiffs  "and  other  consumers"  were  overcharged  by  defendants  for  the
prerecorded  music products they purchased.  The Complaint  further alleges that
the purported  agreements  constituted illegal monopoly power, illegal tying and
price-fixing  and  violated  Sections  1 and 2 of  the  Sherman  Antitrust  Act,
Section 3 of the  Clayton Act and certain  sections of the  California  Business
and Professions  Code.  Plaintiffs seek treble damages,  attorneys'  fees, costs
and  disbursements  and such  further  relief  as the  court  may deem  just and
proper.  The  Company  denies  the  allegations  of  wrongdoing  and  intends to
vigorously defend this litigation.

   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 other  litigation  incidental to the conduct of
its  businesses.  The Company  does not believe  that any such other  litigation
will have a material  adverse  effect on its  liquidity,  financial  position or
results of operations.

NOTE 3 - FINANCING

     Credit Facility:  The Company has a $472.8  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  (plus any
proceeds and tax benefits resulting from stock option exercises and tax benefits
resulting from restricted  shares purchased by employees from the Company),  and
require the Company to meet certain  financial  measures  regarding fixed charge
coverage,  leverage and tangible net worth.  The Company is prohibited under the
Credit  Facility from paying cash  dividends on common  shares.  The Company had
borrowings  outstanding  under the Credit  Facility  of $385.3 as of October 22,
2000 and $133.4 as of January 23, 2000.

     Lease Financing Facility: The Company has a $175.0 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's
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. The Lease Facility contains covenants and events
of default that are similar to those contained in the Credit Facility  described
above.  There was $173.5  outstanding under the Lease Facility as of October 22,
2000 and  $162.9  as of  January  23,  2000.  During  October,  2000,  temporary
financing was provided for four of the properties  previously financed under the
Lease Facility, totaling approximately $13.8, in order to provide capacity under
the Lease  Facility.  The temporary  financing  facility  expires on January 25,
2000,  with options to extend the term for up to an  additional 90 days with the
consent of the lender.  The Company's  intent is to obtain  permanent  financing
prior to the expiration of the temporary  facility for properties having a value

<PAGE>

of at least $13.8.  If such  permanent  financing is not  obtained,  the Company
would be obligated under the applicable  leases and lease guaranties to purchase
the properties for an amount equal to the payments  required to repay the amount
of the temporary financing plus 12% of the original cost of the properties.


NOTE 4 - SEGMENT INFORMATION

   The  Company  is  organized  based  upon the  following  operating  segments:
domestic Borders stores,  international  Borders and Books etc.  stores,  Walden
stores,   online  retailing  through  Borders.com,   and  other  (consisting  of
interest expense and certain corporate governance costs).

   Segment data  includes  charges  allocating  certain  corporate  headquarters
costs to each segment.  Transactions  between segments,  consisting  principally
of inventory  transfers,  are recorded  primarily at cost. The Company evaluates
the  performance  of its  segments  and  allocates  resources  to them  based on
anticipated future contribution.

<TABLE>
<CAPTION>

                                    13 Weeks Ended           39 Weeks Ended
                                October 22, October 24, October 22, October 24,
                                   2000        1999         2000        1999
                                ----------  ----------  ----------- -----------
<S>                             <C>         <C>         <C>         <C>

Sales:
    Borders                       $   460.2   $   414.1   $ 1,369.5   $ 1,211.7
    Walden                            188.1       198.9       560.9       573.6
    International                      48.2        39.2       136.3       110.1
                                 ----------  ----------  ----------  ----------
         Total stores                 696.5       652.2     2,066.7     1,895.4
    Borders.com                         7.3         4.1        17.7        10.6
                                 ----------  ----------  ----------  ----------
                                  $   703.8   $   656.3   $ 2,084.4   $ 1,906.0
                                 ==========  ==========  ==========  ==========

Net income (loss):
    Borders                       $    6.5    $    6.6    $   25.0    $   16.4
    Walden                            (1.2)        0.8        (2.8)        4.2
    International                     (4.0)       (2.7)      (11.4)       (8.0)
    Other                             (1.6)       (2.3)       (4.8)       (9.2)
                                 ----------  ----------  ----------  ----------
         Total stores                 (0.3)        2.4         6.0         3.4
    Borders.com                       (4.7)       (3.9)      (13.5)      (11.6)
                                 ----------  ----------  ----------  ----------
                                  $   (5.0)   $   (1.5)   $   (7.5)   $   (8.2)
                                 ==========  ==========  ==========  ==========
<CAPTION>

                                                        October 22, October 24,
                                                           2000        1999
                                                        ----------- -----------
<S>                                                     <C>         <C>

Total assets:
    Borders                                              $ 1,318.1   $ 1,166.1
    Walden                                                   566.0       561.1
    International                                            204.3       190.5
    Other                                                     84.6        72.8
                                                        ----------  ----------
         Total stores                                      2,173.0     1,990.5
    Borders.com                                               60.2        52.4
                                                        ----------  ----------
                                                         $ 2,233.2   $ 2,042.9
                                                        ==========  ==========
</TABLE>

<PAGE>

NOTE 5 - NEW ACCOUNTING GUIDANCE

   In June 1998, the Financial  Accounting  Standards Board issued Statement No.
133,  "Accounting for Derivative  Instruments and Hedging Activities" (FAS 133),
which the Company is required to adopt  effective  January 29, 2001.  Changes in
derivative  fair values will either be  recognized in earnings as offsets to the
changes  in the fair  value  of  related  hedged  assets,  liabilities  and firm
commitments  or,  for  forecasted  transactions,  deferred  and  recorded  as  a
component  of other  stockholders'  equity until the hedged  transactions  occur
and  are  recognized  in  earnings.   The  ineffective   portion  of  a  hedging
derivative's  change in fair value will be  immediately  recognized in earnings.
The  Company  has  reviewed  the  impact  of  adopting  FAS  133 on its  current
derivatives  expected to be  outstanding  as of the  January  29, 2001  adoption
date,  and does not believe  the effect of adopting  FAS 133 will be material to
its financial position or results of operations.


<PAGE>

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 and music  superstores  and the largest  operator of mall-based  bookstores
in the world based upon both sales and number of stores.  At October  22,  2000,
the Company operated 337 superstores  under the Borders name,  including nine in
the  United  Kingdom,  two in  Australia,  and  one  each in  Singapore  and New
Zealand.   The  Company  also  operated  890  mall-based  and  other  bookstores
primarily  under the  Waldenbooks  name, and 31 bookstores  under the Books etc.
name  in the  United  Kingdom.  The  Company,  through  its  subsidiary  Borders
Online,  Inc., is also an online retailer of books,  music and video through the
operation of its Internet commerce site, Borders.com.

   The  Company's  third  quarters  of 2000 and 1999  consisted  of the 13 weeks
ended October 22, 2000 and October 24, 1999, 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 39 weeks ended
October  24,  1999  excludes a  one-time  charge  ($5.5  million  pre-tax,  $3.4
million  net-of-tax)  related  to the  departure  of a former  executive  of the
Company.

<TABLE>
<CAPTION>

                                         13 Weeks Ended      39 Weeks Ended
                                       October   October    October  October
                                        22,        24,       22,       24,
                                        2000       1999      2000      1999
                                      ---------  --------- --------- ---------
<S>                                   <C>        <C>       <C>       <C>

Sales                                   100.0%     100.0%    100.0%    100.0%
Cost of merchandise sold, including
 occupancy costs                         74.9       73.7      74.5      74.0
                                      ---------  --------- --------- ---------
Gross margin                             25.1       26.3      25.5      26.0
Selling, general and administrative
 expenses                                25.1       25.5      25.2      25.3
Pre-opening expense                       0.4        0.3       0.2       0.3
Goodwill amortization                     0.1        0.1       0.1       0.1
                                      ---------  --------- --------- ---------
Operating income (loss)                  (0.5)       0.4       0.0       0.3
Interest expense                          0.7        0.8       0.6       0.7
                                      ---------  --------- --------- ---------
Loss before income taxes                 (1.2)      (0.4)     (0.6)     (0.4)
Income tax benefit                       (0.5)      (0.2)     (0.2)     (0.2)
                                      ---------  --------- --------- ---------
Net loss                                 (0.7)%     (0.2)%    (0.4)%    (0.2)%
                                      =========  ========= ========= =========
</TABLE>

<PAGE>

Store Activity

The Company's store activity is summarized below:

<TABLE>
<CAPTION>

                          13 Weeks Ended         39 Weeks Ended        Year
                                                                       Ended
                        October    October     October    October     January
                          22,        24,         22,        24,         23,
                          2000       1999        2000       1999        2000
                        ---------  ---------   ---------  ---------  -----------
<S>                     <C>        <C>         <C>        <C>        <C>

Borders Superstores
Beginning number of
 stores                      319        274        300         250         250
Openings                      18         14         37          38          50
                        ---------  ---------   ---------  ---------  -----------

Ending number of stores      337        288        337         288         300
                        =========  =========   =========  =========  ===========


Walden Mall Bookstores
Beginning number of
 stores                      891        888        904         900         900
Openings                       3          8          8          24          39
Closings                      (4)        (2)       (22)        (30)        (35)
                        ---------  ---------   ---------  ---------  -----------

Ending number of stores      890        894        890         894         904
                        =========  =========   =========  =========  ===========
</TABLE>


13 Weeks Ended October 22, 2000 and October 24, 1999

   Store  sales in the  third  quarter  of 2000  were  $696.5  million,  a $44.3
million,  or 6.8%,  increase  over third  quarter 1999 sales of $652.2  million.
Borders  domestic  superstore  sales  increased  $46.1  million,  or 11.1%,  due
primarily  to new store  openings  and a 1.3%  comparable  store sales  increase
during the  quarter.  Walden  sales  decreased  $10.8  million  due to the lower
number of stores,  a comparable  store sales  decrease of 5.4%, and $2.5 million
lower sales at All Wound Up. The  percentage  change in  comparable  store sales
in the third quarter of 2000 was negatively  impacted by  approximately  1.8% at
Borders  and 4.2% at  Walden as a result of the  unusually  high  level of prior
year sales of Pokemon product.  International  sales of $48.2 million  increased
23.0%  over  1999  sales  of  $39.2  million,  reflecting  primarily  new  store
openings.  Borders.com  sales  increased  78.0%  to  $7.3  million  versus  $4.1
million for the same period last year.

   Gross  margin  as a  percentage  of sales  declined  to  25.1%  in the  third
quarter of 2000 from  26.3% in the third  quarter of 1999.  As a  percentage  of
sales,  the decrease in gross  margin was caused  primarily by 0.5% from reduced
leverage  of  occupancy  costs,  0.2% from  increased  promotional  activity  at
Walden in the third  quarter as compared  to the prior  year,  0.2% from the All
Wound Up business and 0.2% from a shrinkage adjustment at Borders.

   As a  percentage  of  sales,  SG&A  expense  improved  to 25.1% in the  third
quarter  of  2000,  compared  to  25.5%  for the  same  period  last  year.  The
improvement  in SG&A as a percent  of sales  resulted  from  strong  control  of
expenses in all segments of the business,  particularly  payroll  expense in the
Borders and Walden stores.

   Pre-opening  expense  in the third  quarter of 2000 was $2.3  million  versus
$2.0  million  from  the  same  period  in 1999.  Pre-opening  expense  consists

<PAGE>

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 18 Borders  superstores  and 3 Walden stores in the third quarter
of 2000 as compared to 14 Borders  superstores  and 8 Walden stores in the third
quarter of 1999.

   Goodwill  amortization  was  $0.9  million  in  the  third  quarter  of  2000
compared to $1.0 million for the same period in 1999.

   Interest  expense was $4.8  million in the third  quarter of 2000 as compared
to $5.1  million in 1999.  The  decrease  of $0.3  million is  primarily  due to
lower debt levels during the quarter versus a year ago.

   Income tax  benefit  in the third  quarter  of 2000 was $3.2  million  versus
$1.0 million in 1999,  reflecting  an effective tax rate of 38.8% in 2000 versus
39.1% in 1999.

   The  Company's  consolidated  net loss was $5.0 million in the third  quarter
of 2000  compared  to a net loss of $1.5  million in the third  quarter of 1999.
The net loss  incurred  by All  Wound Up in the third  quarter  of 2000 was $2.4
million compared to a net loss of $2.1 million in the third quarter of 1999.

39 Weeks Ended October 22, 2000 and October 24, 1999

     Store sales in the 39 weeks ended October 22, 2000 were $2,066.7 million, a
$171.3  million,  or 9.0%,  increase over sales of $1,895.4  million a year ago.
Borders  domestic  superstore  sales  increased  $157.8 million,  or 13.0%,  due
primarily  to new store  openings  and a 2.3%  comparable  store sales  increase
during the period.  Walden  sales  decreased  $12.7  million due  primarily to a
comparable store sales decrease of 2.8%.  International  sales of $136.3 million
increased  23.8% over 1999 sales of $110.1  million,  reflecting  primarily  new
store openings.  Borders.com sales increased 67.0% to $17.7 million versus $10.6
million for the same period last year.

   Gross  margin as a  percentage  of sales  was  25.5%  for the 39 weeks  ended
October  22,  2000  versus  26.0%  for the same  period  of 1999.  The  decrease
primarily  reflects the loss of leverage on  occupancy  costs due to lower sales
for Walden and  increased  promotional  activity at Walden in the third  quarter
of 2000.

   As a  percentage  of sales,  SG&A  expense  (excluding  one-time  charge) was
25.2% for the 39 weeks ended  October 22, 2000 versus  25.3% for the same period
a year ago.

   Pre-opening  expense  for the 39  weeks  ended  October  22,  2000  was  $4.7
million  versus $5.6 million from the same period in 1999.  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 37 Borders  superstores  and 8 Walden  stores in
the 39 weeks ended  October 22, 2000 as compared to 38 Borders  superstores  and
24 Walden stores in the 39 weeks ended October 24, 1999.

   Goodwill  amortization  was $2.7  million for the 39 weeks ended  October 22,
2000 versus $2.6 million for the same period last year.

   Interest  expense was $11.6  million for the 39 weeks ended  October 22, 2000
as  compared  to  $13.8  million  in  1999.  The  decrease  of $2.2  million  is
primarily due to lower debt levels during the period versus a year ago.

     Income tax benefit for the 39 weeks ended October 22, 2000 was $4.8 million
versus  $3.2  million in 1999  (excluding  $2.1  million  for a one-time  charge
related to the  departure of a former  executive),  reflecting  an effective tax
rate of 38.8% in 2000 versus 39.1% in 1999.


<PAGE>

   The  Company's  year-to-date  consolidated  net loss was $7.5 million in 2000
compared  to a net loss of $4.8  million in 1999  (excluding  a one-time  charge
incurred in 1999 related to an executive  departure).  The net loss  incurred by
All Wound Up in 2000 was $5.7  million  compared  to a net loss of $3.4  million
in 1999.  All Wound Up has  performed  below  expectations  in the current year.
All Wound Up is a highly  seasonal  business  and the fourth  quarter is vitally
important.  The  Company  will  evaluate  the  future  of  this  business  after
assessing its performance in the holiday season.


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  continued  development  of  Borders.com  and the retail  convergence
strategy.

     Net cash used for  operations  for the 39 weeks ended  October 22, 2000 was
$168.1 million as compared to $111.9 million in the corresponding  period in the
prior year. Cash from  operations for the period  primarily  reflects  operating
results net of non-cash  depreciation and amortization  expense.  Operating cash
outflows for the period were primarily the result of inventory  purchases net of
accounts  payable,  tax payments and payment of accrued  liabilities  during the
period.

   Net  cash  used for  investing  for the  first  39  weeks  of 2000 was  $86.0
million  as  compared  to  $112.7  million  in the  first 39 weeks of 1999,  and
primarily  represents  capital  expenditures  for new  stores.  Excluding  $16.5
million for the  acquisition  of All Wound Up in 1999, the reduction in net cash
used  for  investing  was  primarily   caused  by  a  lower  amount  of  capital
expenditures  as a result of fewer store openings  through the first 39 weeks of
2000 as compared to the same period in 1999.

   Net cash  provided  by  financing  in the  first 39 weeks of 2000 was  $269.1
million  versus $230.6  million in the first 39 weeks of 1999. 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 continued  development of Borders.com and
the retail convergence strategy.

     The  Company  has a  $472.8  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), and require the
Company to meet certain  financial  measures  regarding  fixed charge  coverage,
leverage  and  tangible net worth.  The Company is  prohibited  under the Credit
Facility from paying cash dividends on common shares. The Company had borrowings
outstanding  under the  Credit  Facility  of $385.3 as of October  22,  2000 and
$133.4 as of January 23, 2000.

     The Company has a $175.0 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's 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.  The Lease  Facility  contains  covenants and events of default
that are similar to those contained in the Credit Facility described above.


<PAGE>

   There were 44 and 41 properties  financed through the Lease Facility,  with a
financed  value of $173.5  million  and $162.9  million,  as of October 22, 2000
and  January  23,  2000,  respectively.  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  October  2000,  temporary  financing  was  provided for four of the
properties previously financed under the Lease Facility,  totaling approximately
$13.8  million,  in order to  provide  capacity  under the Lease  Facility.  The
temporary financing facility expires on January 25, 2000, with options to extend
the term for up to an  additional  90 days with the consent of the  lender.  The
Company's intent is to obtain permanent financing prior to the expiration of the
temporary  facility for properties having a value of at least $13.8 million.  If
such permanent  financing is not obtained,  the Company would be obligated under
the  applicable  leases and lease  guaranties to purchase the  properties for an
amount  equal to the  payments  required  to repay the  amount of the  temporary
financing plus 12% of the original cost of the properties.

   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.

   The  Company  currently  has  a  share  repurchase   program  in  place  with
remaining  authorization  to  repurchase  approximately  $65.8  million  of  its
common  stock as of October  22,  2000.  During the 39 weeks  ended  October 22,
2000, the Company repurchased $7.2 million of its common stock.

   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>

                          PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

The  Company's  Form 10-K Annual  Report for the fiscal  year ended  January 23,
2000, and its Form 10-Q quarterly  reports  describe  pending  lawsuits  against
the Company.  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
significant  developments  in these  matters  since the filing of the  Company's
Form 10-Q Report for the quarter ended July 23, 2000, except as follows:

   The   plaintiffs   in  the   litigation   instituted  by  the  American
   Booksellers  Association  (ABA) and 26  independent  bookstores  in the
   United States  District  Court for the Northern  District of California
   against  the  Company  and  Barnes  &  Noble,  have  provided  a report
   estimating  damages  against the Company,  exclusive  of  interest,  as
   follows:   (i)  between  an   aggregate  of   approximately   $2.8  and
   approximately  $3.3  million  (before  trebling)  with  respect  to the
   Robinson-Patman   Act   claims   of  the  26   independent   bookseller
   plaintiffs,  and  (ii)  between  an  aggregate  of  approximately  $5.5
   million  and   approximately   $9.5   million   with   respect  to  the
   disgorgement  claims under  California law for the geographic  areas of
   the  California  plaintiffs.  The  Company's  pleadings  in the  action
   deny  any   liability   to   plaintiffs,   and  the  Company   disputes
   plaintiffs'  claims of damages.  On November 16, the court  granted the
   motion of the Company  and Barnes & Noble to dismiss  the  disgorgement
   claims   brought  by  the  ABA  under   California  law  on  behalf  of
   independent  booksellers  in the state of California  who are not named
   in the litigation.

   An  Amended  Complaint  has  been  filed  in  the  action  relating  to
   overtime  pay  initially  brought  by  two  former  employees,  Marissa
   Everett and Terry Blagsvedt,  in the Superior Court of California.  The
   Amended  Complaint  was filed by four  named  plaintiffs,  individually
   and on  behalf of a  purported  class  consisting  of all  current  and
   former  employees  who worked as assistant  managers in Borders  stores
   in the State of  California  at any time between April 10, 1996 and the
   present.   The   Amended   Complaint   alleges   that  the   individual
   plaintiffs  and the  purported  class  members  worked  hours for which
   they  were  entitled  to  receive,   but  did  not  receive,   overtime
   compensation  under  California  law, and that they were  classified as
   "exempt" store  management  employees but were forced to work more than
   50% of their time in non-exempt  tasks. The Amended  Complaint  alleges
   violations of the  California  Labor Code and the  California  Business
   and  Professions  Code.  The relief sought  includes  compensatory  and
   punitive  damages,  penalties,  preliminary  and permanent  injunctions
   requiring  Borders  to pay  overtime  compensation  as  required  under
   California and Federal law, prejudgment  interest,  costs and attorneys
   fees and such  other  relief as the court  deems  proper.  The  Company
   intends to vigorously  defend the action,  including  again  contesting
   the certification of the action as a class action.

   On October 10, 2000,  Edward Michael  O'Brien and Saviorg  Corporation,
   as pro  se  litigants,  instituted  an  action  in  the  United  States
   District  Court for the Central  District of  California  against  Time
   Warner,  Inc.  ("Time  Warner"),  Warner Music Group ("Warner  Music"),
   Warner-Electra-Atlantic  Corporation  ("Warner-Electra"),  Warner Bros.
   Records,    Inc.   ("Warner   Bros."),    Atlantic    Recording   Corp.
   ("Atlantic"),    Elektra    Entertainment    Group,   Inc.    ("Elektra
   Entertainment"),   Rhino  Entertainment  Company  ("Rhino"),   Wal-Mart
   Stores, Inc. ("Wal-Mart"),  K-Mart Corporation ("K-Mart"),  the Company
   and  Morning  Glory  Music  ("Morning  Glory").  The  Complaint,  which
   contains  allegations  similar  to those made in the  Markowitz  action
   described  in the  Company's  Form 10-Q  Report for the  quarter  ended
   April 23,  2000,  alleges  that Warner  Music,  Warner-Electra,  Warner
   Bros., Atlantic,  Elektra  Entertainment,  Rhino, Wal-Mart, the Company
   and Morning Glory  conspired  with  defendant  Time Warner to implement
   and maintain Time Warner's minimum  advertised  pricing  policies,  and
   that those  agreements were in restraint of trade and illegally  fixed,
   raised,  maintained  and/or  stabilized,  at artificial  noncompetitive
   levels,  prices  for  prerecorded  music  products,  including  compact

<PAGE>

   disks,  cassettes and albums.  The  Complaint  asserts that as a result
   of these alleged  agreements,  plaintiffs  "and other  consumers"  were
   overcharged  by  defendants  for the  prerecorded  music  products they
   purchased.   The   Complaint   further   alleges  that  the   purported
   agreements  constituted  illegal  monopoly  power,  illegal  tying  and
   price-fixing  and  violated  Sections 1 and 2 of the Sherman  Antitrust
   Act,  Section  3 of  the  Clayton  Act  and  certain  sections  of  the
   California  Business  and  Professions  Code.  Plaintiffs  seek  treble
   damages,  attorneys'  fees,  costs and  disbursements  and such further
   relief as the court may deem just and proper.  The  Company  denies the
   allegations  of  wrongdoing  and  intends  to  vigorously  defend  this
   litigation.

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

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.

(b)   Reports on Form 8-K:

      During the 13 week period ended October 22, 2000, one report was filed
      on Form 8-K under Item 5 - Other Events.  This report stated that the
      Company had appointed a new auditing firm.





<PAGE>

                                   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: December 5, 2000                    By:       /s/
                                             ---------------------------
                                             Edward W. Wilhelm
                                             Senior Vice President and
                                             Chief Financial Officer
                                             (Principal Financial and
                                              Accounting Officer)