About That Englishman In New York Who Turned The Page On Barnes & Noble…

From The New Publishing Standard:

And somehow Daunt magically beat the ogre at its own game and apparently, they will all live happily ever after.

The Forbes headline ran “How an Englishman In New York Turned The Page On Barnes & Noble”. Unfortunately there’s not much “how” in this Forbes post.

Hedge-fund buys B&N, appoints British CEO. CEO fires lots of people, uses savings and hedge-fund money to open new stores. The end.

That said, I did appreciate this little gem that was new to me:

Barnes & Noble has two Boston-area locations that were formerly Amazon Books stores (oh the irony) slated among 30 new stores due to open in 2023.

It was worth reading the Forbes article just for that. But that’s one of only three mentions of Amazon, and the other two contribute nothing we didn’t already know.

For our plot we have a traditional retailer threatened by a huge, new-fangled corporate (that will be Amazon)”, and “Barnes & Noble, like other physical booksellers, struggled for about a decade as Amazon and other online book sellers ran roughshod through their market share.

And somehow Daunt magically beat the ogre at its own game and apparently, they will all live happily ever after.

Elliott Advisors is likely to exit its investment over the course of the next few years, which could see Waterstones and Barnes & Noble go public.

Well, yes, Elliott’s exit is a given, because that’s what hedge-funds do. Buy in, make a tidy profit, get out.

And exit becomes all the more likely given the supply chain crisis facing the entire industry amid a recession. 

Link to the rest at The New Publishing Standard

PG was a bit confused by the OP.

James Daunt became the CEO of Barnes & Noble in August, 2019. According to PG’s online research, it appears that Barnes & Noble had about 627 store locations at that time, down from its peak of 726 locations in 2008.

Barnes & Noble is privately owned by a company called Elliott Investment Management L.P. , a privately-held investment/hedge fund which, among other things, means it does not have to tell the general public or anybody except its managing partners very much about what’s going on, including what’s happening with Barnes & Noble.

When Elliott hired Daunt to attempt to save Barnes & Noble, it is generally agreed that BN was in terrible financial shape. Daunt was chosen, in large part because he was credited with saving Waterstones Books in Great Britain.

One of the ways Daunt “turned Barnes & Noble around” is by firing about half of the corporate employees and moving out of Barnes & Noble’s former New York City headquarters into a smaller location.

As the OP says, Elliott is interested in selling Barnes & Noble. PG suspects that Mr. Daunt is in a position to earn a very nice bonus if Elliott can sell Barnes & Noble at a significantly higher price than Elliott paid to acquire the company, which qualified as damaged goods at the time.

In an April 15, 2022, New York Times article titled, How Barnes & Noble Went From Villain to Hero, a Times books and publishing reporter, produced what, in PG’s overwhelmingly modest opinion, was a puff piece for Barnes & Noble and James Daunt, rescuing hero.

Here’s a short excerpt:

Today, virtually the entire publishing industry is rooting for Barnes & Noble — including most independent booksellers. Its unique role in the book ecosystem, where it helps readers discover new titles and publishers stay invested in physical stores, makes it an essential anchor in a world upended by online sales and a much larger player: Amazon.

“It would be a disaster if they went out of business,” said Jane Dystel, a literary agent with clients including Colleen Hoover, who has four books on this week’s New York Times best-seller list. “There’s a real fear that without this book chain, the print business would be way off.”

To be fair to Daunt and Barnes & Noble, the organization was a sinking ship before the Covid lockdowns and even businesses who PG would not classify as sinking ships were hard-hit and are still in recovery mode.

Plus, for a variety of reasons, the US economy looks very likely to drop into a recession in the near future.

The combination of all the various things PG has blabbered about lead him to conclude that the future of Barnes & Noble is not bright and smart money is likely to steer clear of Barnes & Noble in the foreseeable future.

But PG could be completely wrong.

And PG definitely doesn’t discount the possible appearance of dumb money to save Barnes & Noble, Elliott Partners and Daunt from public embarrassment.

11 thoughts on “About That Englishman In New York Who Turned The Page On Barnes & Noble…”

  1. Ah, I read about B&N earlier this morning, from here:

    https://tedgioia.substack.com/p/what-can-we-learn-from-barnes-and

    It had some amusing lines about publishers being upset about a return to the old ways, because the stores no longer just stock whatever the publishers send them, but instead base the prime placement on sales. Store managers are empowered to care about what readers actually want to read. Can you imagine?

    Anyway, now the publishers are upset because they actually have to convince the regional store managers to stock their books, instead of being able to gin up the bestseller lists by shoveling tons of unsellable books that the stores can’t get rid of.

  2. Just as an aside, not a recommendation by any means (precisely because I don’t have financials — and it’s the non-sale-of-books financials, like the various real-estate plays, that will dominate any resolution):

    Money coming in trying to “be 1994 Borders but better” would be dumb. Even aside from the obvious market changes over three decades.

    Money coming in with an appropriate transformation might well still be dumb, but isn’t guaranteed to be dumb. Perhaps someone really can monetize B&N’s core competencies (they’ll have to look darned hard to find them, as the competent people fled at least a decade ago). They can hardly do worse with inappropriate diversification-into-new-inefficiencies (e.g., “more toys!”).

  3. Former Amazon bookstores become B&N stores. Something tells me that Amazon isn’t letting a good thing slip through their fingers there.

    Jane Friedman added a comment:

    Speaking as a publishing industry reporter & observer, I couldn’t agree more with your assessment of James Daunt’s leadership and business strategy. Unfortunately, the picture isn’t quite as bright for B&N as those numbers would have you believe. B&N stores were once quite large (e.g., 25,000 square feet); the new stores opening are less than half that in some cases. And they’re largely re-opening stores that closed during the pandemic.

    It’s also concerning that during a record two years for book sales (the pandemic was great for book sales of all kinds), Barnes & Noble didn’t see the same percentage increase, indicating they’ve lost market share. Some industry insiders believe the current private equity owner is trying to position the company favorably for sale.

    • So, pump and dump, huh? Could be:

      Opening smaller versions of closed stores is more downsizing than expansion. Smaller stores = less shelf space and weaker inventory which implies less backlist. At a time an increasing share of BPH revenues are coming from backlist. Reporting store expansion while reducing shelf space isn’t guaranteed to boost market share or help publishers, especially if it simply consolidates B&M sales under B&M at the expense of non-chain stores.

      In addition, in the UK, the recovery of Waterstones has come at the expense of independent bookshops and employee salary. There have been noisy protests over the latter and this:

      https://www.theguardian.com/books/2019/aug/04/waterstones-founder-tim-waterstone-no-guilt-independent-booksellers-disappearance

      Sustainability is in question given inflation, rising rents, and salary pressures.
      Come the IPO buyers should beware.

        • Well, B&N wasn’t doing so well with the “books* they carried when Riggio gave up.
          He’d tried coffee shops, restaurants, booze, and toys and trinkets. And he tried those because the backlist wasn’t floating the boat.

          Which is why Daunt switched to the smaller (B.Dalton/non-chain) format. And then the backlst came back to life… Zigged while the market zagged…

          As in:

          https://www.nytimes.com/2021/04/18/books/book-sales-publishing-pandemic-coronavirus.html


          In terms of percentage of sales, NPD reported (via Publishers Weekly) that for 2020 “backlist titles accounted for 67% of all print units purchased in 2020, up from 63% the year before. In 2010, backlist accounted for only 54% of all unit sales.”

          BookNet Canada also noted that backlist sales are higher than usual, accounting for 65% of 2020 sales, up front 60% in 2018.

          According to Publishers Lunch (subscription), “Backlist continues to grow even stronger, comprising 70 percent of print sales in the first quarter 2021.

          (The trend was even more pronounced in business books where “86% of sales were backlist titles. When you look at the dozen titles that sold over 100,000 copies in the business category last year, none were published in 2020.”)

          What to make of these reports? Because the data gatherers’ most common definition of the backlist is “titles more than one year old,” exceptionally successful recent titles like Where the Crawdads Sing (1.1 million print copies sold in 2020) and Michelle Obama’s Becoming (600,000 sold in 2020), skew the stats — these books that have more of the characteristics of frontlist titles than archetypical backlist.

          Some dispute while forgetting backlist is sunk cost, thus shows up as pure profit in the oh-so-important quarterlies.

          Also, reducing shelf space is often surrendering the backlist to online.
          Aka, mostly Amazon.

          Again: smaller B&N stores might consolidate B&M sales under B&N to keep the downsized chain afloat but helps publishers not one whit because it doesn’t do a thing to boost year-round traffic or total sales.

  4. I have little love for Barnes & Noble, which back in the day I found to be the inferior version of Borders. That being said, I found myself in one just this week, taking my wife and kid on Wednesday night around 8:00. I was expecting us to be nearly the only customers there. It turned out to be comfortably filled with customers: not packed, but not a depressing empty vault, and with a (short) line to check out. I was impressed.

  5. I love how people cheer on the big box bookstores like B&N as if they’re the underdog or the little guy. Do they forget how these stores crushed local mom-and-pop bookstores in every city they moved into?

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