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 24, 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 organization)          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 26, 1999
            Common Stock                   ------------------------
                                                  77,322,656

<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               17

   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 24,     October 25,
                                                      1999            1998
                                                 --------------  --------------

<S>                                              <C>             <C>
Sales                                             $     656.3     $     558.3
Cost of merchandise sold, including
occupancy costs                                         483.7           412.9
                                                 --------------  --------------

Gross margin                                            172.6           145.4
Selling, general and administrative expenses            167.0           138.5
Pre-opening expense                                       2.0             3.0
Goodwill amortization                                     1.0             0.7
                                                 --------------  --------------

Operating income                                          2.6             3.2
Interest expense                                          5.1             4.6
                                                 --------------  --------------

Income (loss) before income tax                          (2.5)           (1.4)
Income tax expense (benefit)                             (1.0)           (0.6)
                                                 --------------  --------------

Net income (loss)                                 $      (1.5)    $      (0.8)
                                                 ==============  ==============

Earnings per common share data --
   Diluted earnings (loss) per common share       $      (0.02)   $     (0.01)
                                                 ==============  ==============
   Diluted weighted average common shares
   outstanding (in thousands)                           79,853        81,854
                                                 ==============  ==============

   Basic earnings (loss) per common share         $      (0.02)   $     (0.01)
                                                 ==============  ==============
   Basic weighted average common shares
   outstanding (in thousands)                           77,618        76,728
                                                 ==============  ==============

</TABLE>

          See accompanying Notes to Unaudited Condensed Consolidated
                            Financial Statements.


                                      (1)
<PAGE>


<TABLE>

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

                                                         39 Weeks Ended
                                                   October 24,     October 25,
                                                      1999            1998
                                                 --------------  --------------

<S>                                              <C>             <C>
Sales                                             $   1,906.0     $   1,649.5
Cost of merchandise sold, including
occupancy costs                                       1,409.8         1,224.4
                                                 --------------  --------------

Gross margin                                            496.2           425.1
Selling, general and administrative expenses            487.7           398.8
Pre-opening expense                                       5.6             4.1
Goodwill amortization                                     2.6             2.1
                                                 --------------  --------------

Operating income                                          0.3            20.1
Interest expense                                         13.8            11.3
                                                 --------------  --------------

Income (loss) before income tax                         (13.5)            8.8
Income tax expense (benefit)                             (5.3)            3.4
                                                 --------------  --------------

Net income (loss)                                 $      (8.2)    $       5.4
                                                 ==============  ==============

Earnings per common share data --
   Diluted earnings (loss) per common share       $      (0.10)   $      0.07
                                                 ==============  ==============
   Diluted weighted average common shares
   outstanding (in thousands)                           80,268        82,777
                                                 ==============  ==============

   Basic earnings (loss) per common share         $      (0.11)   $      0.07
                                                 ==============  ==============
   Basic weighted average common shares
   outstanding (in thousands)                           77,613        76,394
                                                 ==============  ==============
</TABLE>


          See accompanying Notes to Unaudited Condensed Consolidated
                            Financial Statements.



                                      (2)
<PAGE>


<TABLE>

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

<CAPTION>
                                                                 October 24,  October 25,  January 24,
                                                                    1999         1998         1999
                                                                 -----------  -----------  -----------
<S>                                                              <C>          <C>          <C>
                  ASSETS
Current Assets:
  Cash                                                           $     48.8   $     40.3   $     42.8
  Merchandise inventories                                           1,241.2      1,128.6      1,019.6
  Accounts receivable and other current assets                         64.2         70.9         70.9
                                                                 -----------  -----------  -----------
      Total Current Assets                                          1,354.2      1,239.8      1,133.3
Property and equipment, net of accumulated depreciation
  of $380.1, $319.8 and $331.6 at October 24, 1999,
  October 25, 1998 and January 24, 1999, respectively                 532.7        450.3        493.8
Other assets and deferred charges                                      33.9         32.6         33.5
Goodwill, net of accumulated amortization of $48.6, $45.2,
  and $46.0 at October 24, 1999, October 25, 1998 and
  January 24, 1999, respectively                                      122.1        107.9        106.0
                                                                 -----------  -----------  -----------
      Total Assets                                               $  2,042.9   $  1,830.6   $  1,766.6
                                                                 ===========  ===========  ===========
   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt and capital lease
   obligations due within one year                               $    376.2   $    348.2   $    134.1
  Trade accounts payable                                              697.3        631.3        607.2
  Accrued payroll and other liabilities                               181.5        161.5        221.7
  Taxes, including income taxes                                        18.0          3.9         25.8
                                                                 -----------  -----------  -----------
      Total Current Liabilities                                     1,273.0      1,144.9        988.8
Long-term debt and capital lease obligations                            5.7          6.0          6.3
Other long-term liabilities                                            65.4         53.9         56.4
                                                                 -----------  -----------  -----------
      Total Liabilities                                             1,344.1      1,204.8      1,051.5
                                                                 -----------  -----------  -----------
Stockholders' Equity:
Common stock; 300,000,000 shares authorized;
  77,169,700, 76,694,375 and 77,695,124 issued
  and outstanding at October 24, 1999, October 25, 1998,
  and January 24, 1999, respectively                                  675.2        683.2        687.3
Officers receivable and deferred compensation                          (4.7)        (4.6)        (7.7)
Accumulated other comprehensive income                                  0.1         (2.5)        (0.9)
Retained earnings (accumulated deficit)                                28.2        (50.3)        36.4
                                                                 -----------  -----------  -----------
      Total Stockholders' Equity                                      698.8        625.8        715.1
                                                                 -----------  -----------  -----------
      Total Liabilities & Stockholders' Equity                   $  2,042.9   $  1,830.6   $  1,766.6
                                                                 ===========  ===========  ===========
</TABLE>

           See accompanying Notes to Unaudited Condensed Consolidated
                              Financial Statements.


                                      (3)
<PAGE>


<TABLE>

                              BORDERS GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   FOR THE 39 WEEKS ENDED OCTOBER 24, 1999
                            (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 24, 1999   77,695,124  $  687.3    $  (7.7)       $  (0.9)     $  36.4   $  715.1
                              ----------  --------    -------        -------      -------   --------

Net loss                             --        --         --             --          (8.2)      (8.2)
Currency translation
adjustment, net of taxes             --        --         --             1.0          --         1.0
                                                                                            --------
Comprehensive Income                                                                            (7.2)
Issuance of common
stock                          1,670,478       9.3        --             --           --         9.3
Repurchase and
retirement of common
stock                         (2,195,902)    (21.4)       --             --           --       (21.4)
Change in receivable
and deferred
compensation                         --        --         3.0            --           --         3.0
                              ----------  --------    -------        -------      -------   --------

Balance at October 24, 1999   77,169,700  $  675.2    $  (4.7)       $   0.1      $  28.2   $  698.8
                              ==========  ========    =======        =======      =======   ========

</TABLE>

           See accompanying Notes to Unaudited Condensed Consolidated
                              Financial Statements.



                                      (4)
<PAGE>


<TABLE>

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

<CAPTION>

                                                         39 Weeks Ended
                                                    October 24,    October 25,
                                                       1999           1998
                                                   ------------  -------------
<S>                                                <C>           <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income (loss)                                    $     (8.2)   $      5.4
Adjustments  to  reconcile  net  income  (loss) to
operating cash flows:
  Depreciation and goodwill amortization                   60.8          45.6
  Change in other long-term assets and liabilities          2.8           5.3
  Cash  provided by (used for) current  assets and
current liabilities:
   Increase in inventories                               (218.6)       (249.5)
   Increase in accounts payable                            90.0         150.6
   Decrease in accrued liabilities                        (38.1)        (46.3)
   Decrease in taxes payable                               (7.8)        (58.7)
   Other, net                                               7.2           0.5
                                                   ------------  -------------
Net cash used for operations                             (111.9)       (147.1)
                                                   ------------  -------------
INVESTING
Capital expenditures                                      (96.2)       (120.8)
Acquisitions, net of cash acquired                        (16.5)         --
                                                   ------------  -------------
Net cash used for investing                              (112.7)       (120.8)
                                                   ------------  -------------
FINANCING
Net funding from credit facility                          242.1         220.9
Issuance of common stock                                    9.3          42.0
Repurchase of common stock                                (21.4)        (41.3)
Other, net                                                  0.6          21.5
                                                   ------------  -------------
Net cash provided by financing                            230.6         243.1
                                                   ------------  -------------
Net increase/(decrease) in cash and equivalents             6.0         (24.8)
Cash and equivalents at beginning of year                  42.8          65.1
                                                   ------------  -------------
Cash and equivalents at end of period                $     48.8    $     40.3
                                                   ============  =============
</TABLE>

           See accompanying Notes to Unaudited Condensed Consolidated
                              Financial Statements.


                                      (5)
<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 24, 1999.

   The Company's fiscal year ends on the Sunday  immediately  preceding the last
Wednesday in January.  At October 24, 1999, the Company operated 288 superstores
under the Borders name, including one in Singapore, one in Australia, one in New
Zealand,  and five in the United  Kingdom,  894 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.

   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 Company  intends to vigorously
defend the action.


                                      (6)
<PAGE>



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



   In August 1998, The Intimate  Bookshop,  Inc. 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.,  Amazon.com,  Inc., certain
publishers and others alleging  violations 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 $11.25 or more and requests
treble  damages [on behalf of the named  plaintiffs],  as well as 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,  Inc.  in March of 1998.
Defendants have filed a Motion to Dismiss, which has been briefed and argued. In
response to the Motion to Dismiss,  Plaintiffs  voluntarily withdrew their state
law claims. 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 & 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.  The Company  intends to
vigorously defend the action.

   A trial  date of April 9, 2001 has been set in the ABA case and a trial  date
in the Richardson  case has been set for 90 days after the conclusion of the ABA
case trial.

   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.



                                      (7)
<PAGE>


                             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 $361.9 as of October 24, 1999 and $131.9 as of January 24, 1999.

   Seasonal Facility:  The Company has a $130.0 multicurrency seasonal revolving
credit facility (the Seasonal  Facility) which expires in July 2000.  Borrowings
under the Seasonal  Facility bear  interest at a base rate or an increment  over
LIBOR  at  the  Company's  option.  The  Seasonal  Facility  contains  operating
covenants  that are similar to the operating  covenants  contained in the Credit
Facility  described  above.  The Company had  borrowings  outstanding  under the
Seasonal  Facility of $11.7 as of October  24,  1999.  There were no  borrowings
outstanding as of 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'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.  There was $153.2  outstanding  under the Lease
Facility as of October 24, 1999 and $123.9 as of January 24, 1999.



                                      (8)
<PAGE>



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



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, 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            39 Weeks Ended
                            October 24,  October 25,  October 24,  October 25,
                               1999         1998         1999         1998
                            -----------  -----------  -----------  -----------
<S>                         <C>          <C>          <C>          <C>
Sales:
    Stores                     $  652.2     $  556.9     $1,895.4     $1,647.5
    Borders.com                     4.1          1.4         10.6          2.0
                            -----------  -----------  -----------  -----------
    Total sales                $  656.3     $  558.3     $1,906.0     $1,649.5
                            ===========  ===========  ===========  ===========

Net income (loss):
    Stores                     $    2.4     $    2.1     $    3.4     $   12.2
    Borders.com                    (3.9)        (2.9)       (11.6)        (6.8)
                            -----------  -----------  -----------  -----------
    Total net income (loss)    $   (1.5)    $   (0.8)    $   (8.2)    $    5.4
                            ===========  ===========  ===========  ===========


                                                      October 24,  October 25,
                                                         1999         1998
                                                      ----------   -----------
Total assets:
    Stores                                              $1,990.5      $1,785.7
    Borders.com                                             52.4          44.9
                                                      ----------   -----------
    Total assets                                        $2,042.9      $1,830.6
                                                      ==========   ===========
</TABLE>


                                      (9)
<PAGE>



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



NOTE 5 - ACCOUNTING POLICIES

   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 three quarters 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 accounted for this change as a change in estimate;
accordingly,  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  three  quarters  of 1999,  and are not
expected to have a material impact for the full year.


                                      (10)
<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  24,  1999,  the
Company  operated  288  superstores  under the Borders  name,  including  one in
Singapore, one in Australia, one in New Zealand, and five in the United Kingdom,
894 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 also
one of the nation's  largest  specialty coffee retailers with cafe operations in
nearly all of its superstores.

   The Company's third quarters of 1999 and 1998 consisted of the 13 weeks ended
October 24, 1999 and October 25, 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 39 weeks ended
October 24, 1999 excludes the non-recurring charge related to Mr.
Pfeffer's departure):

<TABLE>
<CAPTION>
                                          13 Weeks Ended            39 Weeks Ended
                                      October 24,  October 25,  October 24,  October 25,
                                         1999         1998         1999          1998
                                      -----------  -----------  -----------  -----------

<S>                                   <C>          <C>          <C>          <C>
Sales                                     100.0%       100.0%       100.0%       100.0%
Cost of merchandise sold, including
occupancy costs                            73.7         74.0         74.0         74.3
                                      -----------  -----------  -----------  -----------
Gross margin                               26.3         26.0         26.0         25.7
Selling, general and administrative
expenses                                   25.5         24.8         25.3         24.2
Pre-opening expense                         0.3          0.5          0.3          0.2
Goodwill amortization                       0.1          0.1          0.1          0.1
                                      -----------  -----------  -----------  -----------
Operating income                            0.4          0.6          0.3          1.2
Interest expense                            0.8          0.8          0.7          0.7
                                      -----------  -----------  -----------  -----------
Income (loss) before income taxes          (0.4)        (0.2)        (0.4)         0.5
Income tax expense (benefit)               (0.2)        (0.1)        (0.2)         0.2
                                      -----------  -----------  -----------  -----------
Net income (loss)                          (0.2)%       (0.1)%       (0.2)%        0.3%
                                      ===========  ===========  ===========  ===========

</TABLE>


                                      (11)
<PAGE>



Store Activity

The Company's store activity is summarized below:

<TABLE>
<CAPTION>
                                                                                    Year
                                 13 Weeks Ended            39 Weeks Ended          Ended
                             October 24,  October 25,  October 24,  October 25,  January 24,
                                1999         1998         1999         1998         1999
                             -----------  -----------  -----------  -----------  -----------

<S>                          <C>          <C>          <C>          <C>          <C>
Borders Superstores
Beginning number of
  stores                             274          213          250          203          203
Openings                              14           25           38           35           47
                             -----------  -----------  -----------  -----------  -----------
Ending number of stores              288          238          288          238          250
                             ===========  ===========  ===========  ===========  ===========


Walden Mall Bookstores
Beginning number of
  scores                             888          899          900          923          923
Openings                               8            5           24           10           16
Closings                              (2)          (8)         (30)         (37)         (39)
                             -----------  -----------  -----------  -----------  -----------
Ending number of stores              894          896          894          896          900
                             ===========  ===========  ===========  ===========  ===========
</TABLE>



13 Weeks Ended October 24, 1999 and October 25, 1998

   Store  sales in the  third  quarter  of 1999  were  $652.2  million,  a $95.3
million,  or 17.1%,  increase over third  quarter 1998 sales of $556.9  million.
Borders' sales increased $85.5 million,  or 24.5%, due to new store openings and
a comparable  store sales increase of 6.6%.  Walden sales increased $9.7 million
due to a  comparable  store  sales  increase  of 2.1% and the sales of  recently
acquired All Wound Up, offset by the lower number of stores.  Borders.com  sales
were $4.1 million versus $1.4 million for the same period last year.

   Gross margin as a  percentage  of sales was 26.3% in 1999 versus 26.0% in the
third  quarter  of  1998.  The  increase  primarily  reflects   improvements  in
distribution efficiency and occupancy leverage.

   As a percentage of sales,  SG&A expense was 25.5% in 1999 versus 24.8% in the
third  quarter of 1998.  The  increase in SG&A is largely  related to  increased
spending on Borders.com,  continued investment in international  superstores and
start-up expenses of All Wound Up.

   Pre-opening expense in the third quarter of 1999 was $2.0 million versus $3.0
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 14
Borders superstores and 8 Walden stores in the third quarter of 1999 as compared
to 25 Borders superstores and 5 Walden stores in the third quarter of 1998.

   Goodwill  amortization  was $1.0 million in the third  quarter of 1999 versus
$0.7  million  from  the  third  quarter  of  1998.  The  increase  in  goodwill
amortization is due to the acquisition of All Wound Up in 1999.

                                      (12)
<PAGE>


   Interest expense was $5.1 million in the third quarter of 1999 as compared to
$4.6  million in 1998.  The  increase of $0.5  million is  primarily  related to
interest  on  borrowings  to fund the  opening  of  domestic  and  international
superstores,  the repurchase of the Company's  common stock, and the acquisition
of All Wound Up.

   Income tax  benefit in the third  quarter of 1999 was $1.0  million  versus
$0.6 million in 1998.

39 Weeks Ended October 24, 1999 and October 25, 1998

   Store sales in the 39 weeks ended October 24, 1999 were $1,895.4  million,  a
$247.9  million,  or 15.0%,  increase  over store  sales for the 39 weeks  ended
October 25, 1998 of $1,647.5  million.  Borders' sales increased $244.2 million,
or 23.8%,  due to new store  openings and a comparable  store sales  increase of
5.0%.  Walden sales increased $2.6 million due to the sales of recently acquired
All Wound Up, offset by the lower number of stores and a comparable  store sales
decrease of 0.7%.  Borders.com  sales were $4.1 million  versus $1.4 million for
the same period last year.

   Gross  margin as a  percentage  of sales  was  26.0%  for the 39 weeks  ended
October  24,  1999  versus  25.7%  for the same  period  in 1998.  The  increase
primarily  reflects  improvements  in  distribution   efficiency  and  occupancy
leverage.

   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 for the
39 weeks ended October 24, 1999 versus 24.2% for the same period a year ago. The
increase  in SG&A is  largely  related to  increased  spending  on  Borders.com,
continued  investment in international  superstores and start-up expenses of All
Wound Up.

   Pre-opening  expense in the 39 weeks ended  October 24, 1999 was $5.6 million
versus $4.1 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 38 Borders superstores and 24 Walden stores in the 39 weeks ended
October 24, 1999 as compared to 35 Borders  superstores  and 10 Walden stores in
the 39 weeks ended October 25, 1998.

   Goodwill amortization was $2.6 million in the 39 weeks ended October 24, 1999
versus  $2.1  million  for the same  period in 1998.  The  increase  in goodwill
amortization is due to the acquisition of All Would Up in 1999.

   Interest  expense was $13.8 million in the 39 weeks ended October 24, 1999 as
compared to $11.3  million in 1998.  The  increase of $2.5  million is primarily
related  to  interest  on  borrowings  to  fund  the  opening  of  domestic  and
international superstores, the repurchase of the Company's common stock, and the
acquisition of All Wound Up.

   Income  tax  benefit  (excluding  the  non-recurring  charge  related  to Mr.
Pfeffers's  departure)  for the 39 weeks ended October 24, 1999 was $3.2 million
as compared to income tax expense of $3.4 million in 1998.

   In the first  quarter of fiscal  1999,  Philip M.  Pfeffer  resigned as Chief
Executive  Officer and  director  of the  Company.  The Company  took a one-time
charge  of  $3.4  million  ($5.5  million  pre-tax)  relating  to Mr.  Pfeffer's
departure in the first quarter.

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 39 weeks  ended  October  24, 1999 was
$111.9 million as compared to $147.1 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, and an increase
in accounts  payable.  Operating cash outflows for the period were primarily the
result of  inventory  purchases,  and  decreases  in taxes  payable  and accrued
liabilities during the period.

                                      (13)
<PAGE>


   Net cash used for investing for the first 39 weeks of 1999 was $112.7 million
as  compared  to $120.8  million  in the first 39 weeks of 1998,  and  primarily
represents capital  expenditures for new stores and the acquisition of All Wound
Up.

   Net cash  provided  by  financing  in the  first 39 weeks of 1999 was  $230.6
million  versus $243.1  million in the first 39 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 has a $425.0 million  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 $361.9 million as of
October 24, 1999 and $131.9 million as of January 24, 1999.

   The Company has a $130.0  million  multicurrency  seasonal  revolving  credit
facility (the Seasonal  Facility) which expires in July 2000.  Borrowings  under
the Seasonal Facility bear interest at a base rate or an increment over LIBOR at
the Company's option.  The Seasonal Facility contains  operating  covenants that
are  similar  to  the  operating  covenants  contained  in the  Credit  Facility
described  above.  The Company had  borrowings  outstanding  under the  Seasonal
Facility  of $11.7  million as of October  24,  1999.  There were no  borrowings
outstanding as of January 24, 1999.

   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 40 properties financed through the Lease Facility, with a financed
value of $153.2 million,  as of October 24, 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.

                                      (14)
<PAGE>


   The Company currently has a share repurchase  program in place with remaining
authorization to repurchase  approximately  $59.8 million of its common stock as
of October 24,  1999.  During the 13 and 39 weeks ended  October 24,  1999,  the
Company  repurchased  $14.0  million  and $21.4  million  of its  common  stock,
respectively.


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.


      FINANCIAL AND NON-FINANCIAL  INFORMATION  TECHNOLOGY SYSTEMS
      These systems  encompass both  application  software and operating  system
      software.  Assessment,  renovation,  and  implementation  of modifications
      concerning critical  application software and operating system software is
      complete. The assessment of non-critical  application and operating system
      software is also complete.  Renovation and implementation of modifications
      concerning  non-critical  software  will be  completed  in  December.  The
      Borders.com  system was designed with Year 2000 compliant data structures,
      and  verification  that Year 2000  standards have been  maintained  within
      Borders.com critical applications is complete.


      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.  Confirmation of Year 2000 compliance for
      all  HVAC,  elevators  and  security  systems  at  the  Company's  stores,
      distribution centers, and headquarters has been received from all vendors.
      The Company has completed the assessment,  renovation,  and implementation
      of modifications concerning critical PC and server-related  equipment. The
      assessment   and   renovation  of  the  remaining   non-critical   PC  and
      server-related   equipment  is  complete,   and  the   implementation   of
      modifications  concerning the remaining non-critical PC and server-related
      equipment will be completed in December.


      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.

                                      (15)
<PAGE>


   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 has developed
the major elements of business contingency plans in order to attempt to mitigate
the extent of potential disruption to business operations. The contingency plans
address the following: 1) transition coverage before, during, and after the year
2000  begins,  2)  alternative  processes  to be used in the event of any system
failures,  3)  pro-active  and  preventative  actions to mitigate  the effect of
mission-critical system failures, and 4) the establishment of a specialized Year
2000 Problem  Management Center.  Detailed  procedures and full documentation of
these plans are complete.  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.


   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.



                                      (16)
<PAGE>



                         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 that:  (i) the motion of the  plaintiffs in Rae Richardson et
al vs. Barnes & Noble et al to add approximately 75 plaintiffs to the action has
been denied; and (ii) a trial date of April 9, 2001 has been set in the ABA case
and a trial  date in the  Richardson  case has been  set for 90 days  after  the
conclusion of the ABA case trial.

   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 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

   On July 29, 1999, the Company  issued  options to Mr.  DiRomualdo to purchase
69,063 shares with an exercise  price of $14.1875 in lieu of salary and bonus in
the aggregate amount of $262,439.  This transaction  involved an offer solely to
an executive officer 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.





                                      (17)
<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

(a)   Exhibits:

            10.38 Amendment No. 1 to 1998 Borders Group, Inc. Stock Option
                  Plan.

            27.0  Financial Data Schedule.

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



                                      (18)
<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 8, 1999                    By:         /s/
                                             ---------------------------
                                             Kenneth E. Scheve
                                             Senior Vice President, Chief
                                             Financial Officer and Treasurer
                                             (Principal Financial and
                                              Accounting Officer)

                                      (19)