Borders announced its Q1 2007 results yesterday (read press release or 8-K). Losses deepened, music sales were down and gross margin dropped. The company reported a 2% increase in consolidated sales and a loss of $35.9 million (compared to a loss of $20.2 million last year).

Comp Borders Superstores sales were down 1.9%. DVD sales were flat and music sales declined (no figures were given for either segment).

The fact that Borders' music sales dropped comes as no surprise. National chains such as Borders and Barnes & Noble have been suffering through slumping sales and a tepid new release schedule. There was no mention yesterday of the company's plans for the music segment, although CDs are generally expected to be playing a lesser role in the chain's plans. In March, Borders issued a press release about its strategy and said it will be incorporating digital centers that will emphasize digital content and hardware.