Toy Makers Stare at $11 Billion Hole With Death of Toys ‘R’ Us

15 March 2018

From The Wall Street Journal:

The liquidation of Toys “R” Us Inc. has sent the toy industry reeling, leaving Mattel Inc., Hasbro Inc. and other manufacturers without a large chain devoted to selling games and dolls and forcing them to scramble to secure other outlets to carry their items.

Toys “R” Us, which had more than $11 billion in revenue in its last fiscal year, is part of a group of chains that were once seen by vendors as “category killers” and have emerged as crucial checks on the power of Inc.  Stores like Best Buy Co.  and Barnes & Noble Co. provide electronics manufacturers and book publishers with vast networks of physical showrooms.

The likely death of Toys “R” Us, which early Thursday filed plans to liquidate the U.S. operations and other businesses, means the $27 billion U.S. toy industry will no longer have a national partner to showcase their wares year-round, test experimental products and find the next Shopkins or Zhu Zhu pet.

It was a quick unraveling for Toys “R” Us since its September chapter 11 bankruptcy filing. In a call with employees Wednesday, Toys “R” Us Chief Executive David Brandon described a cascading series of events, starting with what he described as a “devastating” holiday season that led to plans to close more stores and then to exit from the baby-products business to focus on toys.

“The hole that we dug in the holiday season put us in a position where our lender became justifiably nervous as the company was continuing to consume cash,” Mr. Brandon said.

Ultimately, the company is expected to liquidate its entire U.S. operation, a decision that would impact 33,000 jobs. The company also is liquidating operations in other countries, and plans to sell its business in Canada, Central Europe and Asia.

. . . .

“This industry has been devastated,” said Tom Murdough, founder and CEO of Simplay3 Co., which makes plastic play sets and ridable vehicles. “This is a major, major hit to the industry.”

. . . .

The toy-industry growth rate could slump going forward too. Toys “R” Us was primarily responsible for uncovering what would become the next big thing, since it took chances that other retailers avoided. “There aren’t going to be as many breakout hits, not as many new items that can blossom,” said BMO Capital Markets analyst Gerrick Johnson. “Toys ‘R’ Us was a testing ground for a lot of things.”

Link to the rest at The Wall Street Journal

PG notes the mention of Barnes & Noble as playing a similar role in the book world as Toys R Us does in the toy world (although as he mentions in the WaPo item below this post, Toys R Us sells childrens books and major publishers have taken and will take a hit from the loss of this customer).

Toys R Us to close all 800 of its U.S. stores

15 March 2018

From The Washington Post:

Toy store chain Toys R Us is planning to sell or close all 800 of its U.S. stores, affecting as many as 33,000 jobs as the company winds down its operations after six decades, according to a source familiar with the matter.

The news comes six months after the retailer filed for bankruptcy. The company has struggled to pay down nearly $8 billion in debt — much of it dating to a 2005 leveraged buyout — and has had trouble finding a buyer. There were reports earlier this week that Toys R Us had stopped paying its suppliers, which include the country’s largest toymakers. On Wednesday, the company announced it would close all 100 of its U.K. stores. In the United States, the company told employees closures would likely occur over time, and not all at once.

. . . .

 Toys R Us, once the country’s preeminent toy retailer, has been unable to keep up with big-box and online competitors.

. . . .

 “There is no toy business without Toys R Us,” Larian said, noting that he sold his first product to the chain in 1979. “It’s a big deal and I’m going to try to salvage as much of it as possible.”

. . . .

 Despite turnaround efforts at Toys R Us, which included adding more hands-on “play labs,” retail experts say the 60-year-old company has been unable to get customers back into its stores.

. . . .

 “The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way,” Neil Saunders, managing director of the research firm GlobalData Retail, wrote in an email. “Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales.”

Link to the rest at The Washington Post and thanks to Jan for the tip.

PG notes that Toys R Us also sells childrens books.

The 10 Most Famous Bookstores in the World

15 March 2018

From The Literary Hub:

Yesterday was the anniversary of the birth of Sylvia Beach—probably the most notorious bookstore owner in modern history, and the founder of what is still arguably the most famous bookstore in the world: Paris’s Shakespeare and Company. On the occasion of this, her 131st birthday, I was inspired to look into the history of Beach and the bookstore—as well as the stories behind some of the other best, most visited, and most talked-out bookstores around the world. NB that fame, literary and otherwise, necessarily depends on your viewpoint, and because of where I’m standing, this list has something of an American bias. Which is only to say that I’d love to hear about which international bookstores are most famous in the minds of readers in other countries—whether the list is very similar or very different.

. . . .

Shakespeare and Company, Paris

Shakespeare and Company is often described as the most famous bookstore in the world—but which one is the most famous? There have actually been three versions of what is often described as the most famous bookstore in the world: the first was opened by Sylvia Beach in 1919 on the rue Dupuytren. When the store outgrew its walls a few years later, she moved it to the rue de l’Odéon. It was from this location that Beach published Joyce’s Ulysses, and where Joyce, along with Ernest Hemingway, Djuna Barnes, Ezra Pound, Anaïs Nin, Julio Cortázar,James Baldwin, etc etc etc, hung out. But the bookstore was forced to close during the occupation of Paris in WWII. According to the store’s website, it was because Beach didn’t want to sell book to Nazis:

One day that December, a Nazi officer entered her store and demanded Beach’s last copy of Finnegans Wake. Beach declined to sell him the book. The officer said he would return in the afternoon to confiscate all of Beach’s goods and to close her bookstore. After he left, Beach immediately moved all the shop’s books and belongings to an upstairs apartment. In the end, she would spend six months in an internment camp in Vittel, and her bookshop would never reopen.

But in 1951, a man named George Whitman opened a bookstore, called “Le Mistral,” on the rue de la Bûcherie, and in the late ’50s, Beach offered Whitman the name. “I created this bookstore like a man would write a novel, building each room like a chapter,” he told The Washington Post. “I like people to open the door the way they open a book, a book that leads into a magic world in their imaginations.” Shakespeare & Company was reborn, and readers and writers have been flocking to it ever since, even sleeping there. In fact, some 30,000 “Tumbleweeds” have spent some amount of time living in the store, “sleeping on intermittently bedbug-infested cots and benches scattered throughout the store in exchange for a couple of hours of work a day and a promise to spend at least some of their downtime reading and writing; a one-page autobiography is mandatory.” Whitman died in 2011; the bookshop is now run by his daughter, whom he named Sylvia Beach Whitman.

. . . .

Selexyz Dominicanen, Maastricht, The Netherlands

If you worship books, look no further. This 13th-century church served as a grand place of worship until Napoleon Bonaparte turned it into a storage space in 1794; and after he abandoned it, it was used as a warehouse. By 2005, when it was turned into a bookstore designed by architecture firm Merkx + Girod, the church was being used to stash bikes. These days, according to the Guardian, the space “could hardly be more popular.  The beautifully restored building is an attraction in its own right, and yet the installation of a towering, three-storey black steel bookstack in the long, high nave, together with a fashionable if somewhat noisy cafe in the choir, works extraordinarily well. Church and bookshop look as if they might have been made for one another.”  Merkx + Girod won the Lensvelt de Architect Interior Prize in 2007 for their work on the site.

Link to the rest at The Literary Hub

Retail Sales at Bookstores Down in January

15 March 2018

From The American Booksellers Association:

Retail sales at U.S. bookstores were down by 8.4 percent in January 2018 compared to January 2017, according to preliminary figures recently released by the Bureau of the Census. Estimates reflect sales of all types of participating bookstores, including trade, college, religious, chain stores (including superstores), and others.

The independent bookstore channel ended 2017 with a 2.6 percent increase over 2016. As of March 6, the year-to-date sales for independent bookstores, as reported to the weekly Indie Bestseller Lists, were up more than 4 percent over 2017.

Link to the rest at The American Booksellers Association

Why Independent Bookstores Matter Now More Than Ever

6 March 2018

From The Writers Dig:

This past year and a half has been one of turmoil, noise and political chaos, rising to a level that most of us have never experienced. In our world of uncertainty and change, self-care is perhaps more important than ever. Amid an onslaught of 24-7 news and a seemingly increasingly unstable world, we need to find points of calm. I have found a major haven over the past few years in independent bookstores, and I wanted to talk a little bit about as to why I think they’re more important today than ever.

Sure, online retailers (and I’m sure we all have the “big one” in mind) can offer customers significantly lower prices and an exponentially greater book inventory. Yes, there’s also the convenience factor: Customers don’t need to leave home to buy a book; they can do so from the comfort of their own couch with just the click of a button. But it’s important to remember that the online retailers are e-commerce specialists, not booksellers. Booksellers are people – they are consummate bibliophiles who take joy in matching reader to writer. And that human component is an important part of the literary experience.

. . . .

Community: Independent bookstores are often fixtures in the communities that they serve, acting as everything from a safe space for kids to come to after school, to an enjoyable way for a group of friends to pass a Saturday afternoon. Indie bookstores also help to strengthen the economic base of the local community. In a 2015 “Dear Reader” post, Roxanne Coady—owner of R. J. Julia, an independent bookstore in Madison, CT—said, “For every $100 you spend in a locally owned store, $73 stays in the local economy, whereas $100 spent in national chains returns $43 to the local economy.” Not only do you get a book for those dollars you spend in local stores, but they stay in your community.

. . . .

Convening: The local bookstore offers a home to both authors and readers. It is a welcoming place to come together and to feel comfortable and at ease. It is a place for like-minded individuals to gather together and exchange ideas.

. . . .

Contact: Independent booksellers value engaging those who read, and this personal contact is critical for all of us. Booksellers focus on long-term relationships with customers, and they seek to enhance the direct customer experience through personalized and specialized services. Knowing the customer and supporting their individual interests and needs helps to ensure customer retention.

Link to the rest at The Writers Dig

PG says some independent bookstores are like the descriptions in the OP, but others, unfortunately, are not. He has no problem identifying several independent bookstores he has enjoyed visiting and would happily visit again. Unfortunately, none are nearby and PG’s present reading interests are far enough out of the mainstream that they require a large or very specialized bookstore to satisfy.

Additionally, most of the community/gathering elements described in the OP are available in locations other than bookstores.

When the PG’s go out to lunch, their most frequent destination is a small restaurant where they know and are known by many of the staff. One woman who works there regularly asks Mrs. PG about her latest book.

Of all the businesses adversely impacted by Amazon, PG feels the most sympathy for independent bookstores. Unfortunately, mortuaries are the only successful long-term retail businesses based on sympathy that come immediately to mind.

Barnes & Noble’s Book Club Just Launched Nationwide

5 March 2018

From Bustle:

On Monday, Barnes & Noble announced the formation of a seasonal, in-store book club, and Meg Wolitzer’s The Female Persuasion is the first-ever Barnes & Noble Book Club pick. Discussions will be held at each of the 600+ stores nationwide, beginning on the night of May 2. Better yet: admission to the event is free, and you’ll even get a free coffee, hot or iced, and a free cookie from the café, just for attending.

Barnes & Noble didn’t have a great holiday season in 2017, and the effects of poor sales figures have shown in the first few months of this year. In February, the retailer laid off lead workers without warning, saying that the move “adjust[s] staffing so that it meets the needs of our existing business and our customers.” Layoffs aren’t the only change Barnes & Noble has made to stay afloat over the last few years, as competitors Waldenbooks, Borders, and Books-a-Million have shuttered and downsized. With Amazon opening its own physical bookstores, Barnes & Noble launched several concept stores featuring bars and restaurants in 2017.

The Barnes & Noble Book Club is the latest of the retailer’s efforts to stay in business in the age of Amazon.

Link to the rest at Bustle and thanks to Dave for the tip.

Barnes & Noble’s CEO Demos Parneros on Q3 2018 Results

4 March 2018

Following are excerpts from Barnes & Noble’s latest earnings call following the release of third quarter (4th calendar quarter) results which were the subject of several negative news stories. PG will also remind visitors to TPV of recent Barnes & Noble layoffs that impacted some of their most seasoned store employees.

The speaker in these excerpts is Demos Parneros, the latest CEO of the company.

PG also notes that it appears only two securities analysts participated in the conference call. This is a smaller number than PG recalls on prior earnings calls. PG suspects this reflects very little confidence by shareholders and prospective shareholders that the company has much upside.

From Seeking Alpha:

Entering the holiday period, we were encouraged by the trends that developed during the second quarter and continued into November. Our traffic and conversion trends were improving while book sales were strengthening. Unfortunately, December sales softened primarily due to lower traffic. However, comp store sales improved in January, declining 3.5% for the month. As a result, the third quarter comp sales declined 5.8%, improving 60 basis points as compared to the nine week holiday period.

Our book business continued to outperform the overall comp sales trend, declining 4.1% while double-digit declines in gift, music and DVD categories weighed on the overall performance. This was somewhat offset by growth in toys and games and café businesses.

. . . .

To position our business for growth, the foundation of our strategic plan is built on four pillars. One, strengthening the core. Two, improving profitability. Three, accelerating execution. And finally, number four, innovating for the future.

Let me walk you through each of these. Books are a heritage and centerpiece of everything we do. So the first pillar of our strategic plan is to strengthen the core. As we highlighted last quarter, we are reasserting our book leadership by placing a greater emphasis on books while taking a much more pointed view of our non-book products.

We know that customers value Barnes & Noble for our expansive assortment, the expertise of our booksellers and the experience we provide. Our customer value proposition is a distinct competitive advantage for B&N and we are working to further improve our merchandise mix and hence, the overall shopping experience, increase the value of our membership program and improve our omnichannel capabilities.

To enhance the overall shopping experience, we are evaluating each of our customer touch points and engaging more directly with our customers. This includes evolving our labor model to ensure that booksellers are focused on helping customers first and performing tasks second.

Beyond the in-store experience, Barnes & Noble has tremendous multichannel assets to deliver any book anytime anywhere in any format. Over the course of the past year, we have begun to utilize these assets to improve our omnichannel capabilities and better fulfill our customers’ needs.

. . . .

The second pillar is to improve profitability. We need to return to growing profits and are looking at a series of actions to accomplish this goal. We recently launched an aggressive expense management program that will reduce expenses and redeploy dollars towards our growth initiatives. This includes our recent action to transition to a new, more efficient store labor model that provides greater flexibility and better customer service by eliminating tasks and allowing booksellers to focus more on customers. Making this organizational change was difficult but necessary decision. In addition to improving labor efficiency, our team is focused on doing a thorough review of all areas of the business, with a goal of reducing expenses in other areas such as logistics and direct procurement, to name a few. Our plan is to realize additional expense savings in 2019.

. . . .

To support these efforts, we are focused on attracting, retaining and developing top talent throughout the organization. Over this past year, we have attracted new talent to our senior management team and recently have made another key hire to support our strategic plan. In mid-February, Tim Mantel joined the company as Chief Merchant who will be responsible for overseeing all of the company’s merchandising initiatives.

I am very proud of the work that our team has done. In my first year on the job, I am thrilled to say that we have added eight new executives to our team.

. . . .

Lastly, to support our longer term growth, we need to innovate for the future, which is our fourth pillar. Innovations are our greatest growth accelerator and we are putting tremendous effort behind it. We are excited to announce that later this year we will open five new prototype stores that feature a smaller format and new design. This rightsized format will have a new look and merchandise focused on books and other categories that are more reflective of today’s business model.

. . . .

We anticipate a multiyear process to implement the changes that we have outlined in our strategic plan.

Here are the first two substantive paragraphs from Barnes & Noble’s current CFO:

Consolidated sales decreased $69 million or 5.3% to $1.2 billion. Retail sales decreased $66 million or 5.1% to $1.2 billion for the quarter. Comparable store sales decreased 5.8% while online sales declined 5.2%. The company’s book business declined 4.1%, outperforming the overall comps. Non-book comps declined 7.5% as declines in gift, music and DVD categories accounted for nearly half of the overall comp sales decrease.

Consolidated gross margin decreased $37 million primarily due to the lower sales volume. Rates declined 110 basis points on expense deleverage, increased promotional activity, member discounts and markdowns to clear certain non-returnable inventories.

In a comment to an earlier Barnes & Noble post on TPV, Felix pointed out that BN pays a very large dividend given it’s current operational problems. Here’s a question from an analyst about the size of the dividend and the CEO’s response (both excerpted for reduced length):

ANALYST: [Y]ou have, call it, $100 million of free cash flow at your disposal here. And obviously, you are touching on some of these growth initiatives. And you did say in March, you will evaluate the dividend. I mean, how do you think about that? If there is $100 million of available capital as you are going through your turnaround, you have a ton of time here to get the business rightsized and back on a positive trajectory, how do you think about it, Demos or Allen or Andy? Just it would be great to get your thoughts kind of balancing out growth? I mean, I will tell you, I don’t think you get rewarded whatsoever for your dividend. It’s now almost 15% of your market cap. Just kind of balancing those things out, like investing for the future or even buying back a ton of your stock at the same token?

PARNEROS: [W]e have outlined our 4Q growth strategic initiatives to help us stabilize the business and get back to growth. I would say that we start with relentless focus on customers and really paying attention to what our customers are telling us and I think our team has done a nice job with that.

We have talked about the expense reductions to help stabilize the P&L and also give us more of an opportunity to invest in growth. So I would say that we are moving at a very quick pace but a careful pace. I think we are putting a lot of rigor and analytic view on everything we do.

Our team’s talking a lot, we are testing a lot and we, as we have shared with many of the examples, are doing a lot of different things, whether it be the ship from store and some of the omnichannel initiatives to really speak to how customers want to shop today to developing a smaller but I would say, more intimate and more size-appropriate store that allows us to be very competitive and to be able to fulfill end-of-lease opportunity. So it’s quite a few things happening at once, but I would say there’s a lot of focus and a lot of careful planning.

Perhaps PG missed it, but he didn’t see the word, “dividend”, in any part of the CEO’s response or any reply to the analyst’s observation that the dividend equals about 15% of the company’s market cap.

Link to the rest at Seeking Alpha

Final chapter arrives for this Downtown Boise bookstore

3 March 2018

From The Idaho Statesman:

The signs went up on Wednesday at Trip Taylor Booksellers, announcing the end of yet another small business in Boise’s rapidly changing Downtown: “The Sinking Ship Sale! 75% off EVERYTHING.”

Just days earlier, a letter from the landlord was hand-delivered to the crowded shop, informing Henry Taylor III, aka Trip, that he must empty every crammed shelf, take down the poster from Frank Church’s 1968 U.S. Senate campaign, unplug the aging record player and close the doors by March 31.

“I spent a lot of time last year, mainly trying to keep it going, perhaps partnering with somebody or finding a buyer,” Taylor said Thursday afternoon, as customers streamed in, stunned, saddened and hunting for bargains. “There was a lot of interest, but none of it was nearly serious enough to actually make it happen.”

The 18-year-old cultural institution succumbed to a troubling Boise trend.

. . . .

As Idaho’s center of population, politics and commerce grows, many beloved small businesses have shut their doors, victims of rising rents, changing tastes, increasing property values and burgeoning development.

“Another iconic Boise landmark is toppling,” said David Klinger, who has fought to save other local institutions. “They’re falling fast — Smoky Davis, several Downtown restaurants and breakfast places … and now our town’s primary used bookshop.

“The reasons for closure are many,” Klinger said, “but one of the most common threads or explanations is rising commercial rents and the scarcity of places to move for small businesses that still want to remain in business. So they’re disappearing.”

. . . .

Taylor said it’s possible the store could stay open until the middle of April. Then he will continue selling books online through and doing some writing. Beyond that, the future is unclear.

“It’s still just been too hard in general,” Taylor said. He said he’s been breaking even and not much more. “Last summer was really quite busy. I think we had so many people on the road; there were people here for the eclipse. I thought, ‘Well, maybe if it continues like this.’ But of course it didn’t into the fall. Everything just got harder again.

“I’ve just basically been here all the time lately,” he said. “At least I’ll have a little bit more freedom and space in my life. Other people always see me as the bookseller, but I like to think I have other possible contributions to make.”

. . . .

For many years, three very different bookstores have lived in harmony in Downtown Boise. Trip Taylor sells a wide collection of finer used tomes and is best known for literature, philosophy and art books. Rainbow Books at 1310 W. State St. offers a more mass-market selection. The Rediscovered Bookshop at 180 N. 8th St. sells mostly new books and recent releases.

“I’m heartbroken,” said Bruce DeLaney, who owns Rediscovered with his wife, Laura, and shops regularly at Trip Taylor. “We send people back and forth between our stores. It’s a loss for the reading community. We will miss having his store there.”

. . . .

Asked where he’d shop once Trip Taylor Booksellers shuts its doors, McCarthy paused.

“Rainbow,” he said. “I can usually dig up something there, but they don’t have the good stuff. Not Barnes & Noble.”

Link to the rest at The Idaho Statesman and thanks to Brandt for the tip.

Tracking the slow, sad death of Barnes & Noble via data

2 March 2018

From ThinkNum:

At one point in time, Barnes & Noble Bookseller was celebrated by a retail book industry that had lost its focus. Reading areas, coffee shops, events, large, comfortable spaces: it all added up to a renewed 1990s book culture that appeared to have saved a struggling industry and – in many ways – saved reading.

Until now.

Just last Monday, the company laid off 1,800 workers.

(PG note: The OP was published on February 19, 2018)

. . . .

This all happened despite the fact that the workers were reportedly assured this would not take place.

. . . .

So what can the company do? One would be tempted to suggest that the company go back in time, to a time when the company still had the hearts and minds of millions of shoppers. But the company never really took to digital sales. For years – much like Toys R Us who followed a similar story arc – Barnes & Noble never really got its digital marketing straight. A poorly executed digital reader ecosystem never took off, and bizarre attempts to expand its e-commerce operation all add to a company that’s as confusing to its investors as it is to its customer.

As recently as 2015, then-CEO Ron Boire told investors that poor online sales were the result of poor e-commerce (namely search and checkout) experiences. By then Amazon was already selling millions of physical and digital books to millions of consumers worldwide. It was already too late – to be talking about search functionality in 2015 borders on the absurd.

Link to the rest at ThinkNum

Barnes & Noble: death by a thousand paper cuts

1 March 2018

From The Financial Times:

Look away, bookstore lovers.

Barnes & Noble has just released its latest quarterly results, and they do not make for a pretty read.

The country’s last remaining major bookstore chain reported yet another big sales drop during the holiday quarter as consumers continued to shun brick and mortar shops and do their shopping online.

. . . .

The results come just weeks after Barnes & Noble announced a new cost-cutting plan that will see it lay off workers across its 630 stores. The company did not disclose how many of its 26,000 employees were affected.

. . . .

Sandell Asset Management, one of the company’s top investors, had urged the company to sell itself, arguing that its “unconscionably low” market value failed to reflect its status as the “one truly national bookstore chain”.

Link to the rest at The Financial Times

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