This could be the most crucial holiday season in Barnes & Noble’s history.
Its sales have been in a decline for six years as the bookseller cedes market share to Amazon and consumers turn to their phones or portable tablets instead of books. There’s been a revolving door in the retailer’s C-suite, and activist investors have piled on. Now, Barnes & Noble is considering a sale of its business after receiving interest from a handful of parties, including its founder and executive chairman, Leonard Riggio, and reportedly, U.K. retailer W.H. Smith.
Barnes & Noble must prove it can deliver sales growth in its core book business this holiday season. The retail industry as a whole is expected to benefit from strong consumer spending, with the average American household expected to spend $1,536 through the holidays, according to a survey by Deloitte. That’s up 25 percent from a year ago. If Barnes & Noble can’t grow sales against such a healthy, economic backdrop, the company could ultimately head down the same path as its former rival Borders, or shuttered Toys R Us or Sears, which is in bankruptcy court.
All things considered, Barnes & Noble still has high hopes ahead of the holidays.
“We’ve done a lot of things this year to try to put ourselves on the right track and to get our comp-store sales number to head in the positive direction,” Riggio told CNBC. “And we are hoping that that comes — we are planning for it to come — during this holiday season.”
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Last holiday season, the bookseller’s sales tumbled more than 6 percent, with e-commerce sales also in the red. After the dismal results, the company slashed its staff.
Now, it has a new plan in place for this year. In a new ad campaign that’s being rolled out this week in movie theaters and on cable television, Barnes & Noble touts its more than 20,000 current employees, along with their knowledge of books, as reasons why its stores are unique. “Nobody Knows Books Like We Do” is the message of the campaign, which will run though the middle of January.
Barnes & Noble also will be testing roughly 10 to 15 store layouts during the holidays, featuring different spreads of merchandise, to see what sticks.
“We have a lot of things out there in test form,” Riggio said. “Retail is all about that. … If you’re smart, you conduct tests during the holiday season, and that informs you how to run the next holiday.”
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Within just the past five years, Barnes & Noble has lost more than $1 billion in market value. Its shares have fallen about 4 percent from a year ago, having spiked more recently on deal speculation, and now trade under $7.
“To have a company with a small market cap is somewhat problematic,” Riggio said. “Our market cap is an indicator that we should be a private business.”
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Amazon all the while has managed to take almost 50 percent of new book sales, according to Codex Group, a book audience research firm. While it doesn’t break out Barnes & Noble’s share, Codex says Walmart has about 4.2 percent of the new book market, tied with the category of independent booksellers, which after a period of decline are staging a comeback.
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More recently, however, analysts say Barnes & Noble has struggled from perhaps innovating too much. It’s tested restaurants called “The Kitchen,” but the concept proved too expensive to grow at scale. It still has just five of these eateries, offering $12 avocado toast and $16 brisket burgers. “The top line on our restaurants is good. The bottom line is awful,” Riggio said on a recent earnings call.
America’s independent book chains, meanwhile, are gaining their footing again by sticking to what’s simple and what they know best — selling books. There are still more than 2,300 independent book stores in the U.S., according to the American Booksellers Association.
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“This is a very fragile industry now,” Codex Group CEO Peter Hildick-Smith said. “Our data is suggesting a lot of the books business today is behind the Amazon curtain.” He said more than two-thirds of all books sold on a unit basis are now transacted online.
Taking note of this trend, Riggio has said investments online will be the company’s next priority. Still, he explained, “the magnitude of what the Amazons and the Apples and the Googles can achieve in terms of technology is so far beyond that which we could achieve, we’ve really got to carve out a space for ourselves. … We can’t do it all.”
Link to the rest at CNBC