From The Wall Street Journal:
Barnes & Noble Inc.’s sales swooned in the latest quarter as the struggling bookseller continued to face challenges in attracting people to its stores.
Comparable sales for Barnes & Noble declined 6.1% for the period ended July 28, a result the company said was lower than planned. Total sales declined 6.9% to $794.8 million. Problems for the company also extended to its online channel, as sales fell 14%, in part because of fewer promotions.
Despite the quarterly result, Executive Chairman Leonard Riggio said the company is making progress in efforts to stem the sales decline. Barnes & Noble reported sequential improvement in comparable sales in the past few months, with the metric falling 0.8% in the month of August.
. . . .
Barnes & Noble, the nation’s largest bookstore chain, reported a first-quarter loss of $17 million, or 23 cents a share, compared with a year-earlier loss of $10.8 million, or 15 cents a share. In addition to falling revenue, the company’s results were hurt by a smaller income-tax benefit.
. . . .
Shares of Barnes & Noble, down 31% year to date, were off 7.6% at $4.58 on Thursday afternoon.
. . . .
In a discussion with analysts, Mr. Riggio briefly addressed Mr. Parneros’s lawsuit, saying that the board had acted after “multiple events of significant misconduct, including sexual harassment, bullying behavior and other violations of company policies.” In his lawsuit, Mr. Parneros denied that he had engaged in any misconduct at Barnes & Noble.
Mr. Riggio also took umbrage at Mr. Parneros’s description of his views regarding certain current and former senior staffers, describing the lawsuit as containing “outrageous lies and personal attacks.”
. . . .
Barnes & Noble, Mr. Riggio said, will address the subject of finding a new CEO after the retailer’s annual meeting on Oct. 3. The board will then decide which search firm to hire and which board members will be involved.
“Right now, we aren’t looking,” Mr. Riggio said.
. . . .
John Tinker, an analyst for Gabelli & Co., said he wasn’t surprised the company didn’t address the potential sale. “They’re betting on Christmas coming through, because that will mean they still have a business model,” said Mr. Tinker. “If the holiday period isn’t good, it will show the company is adrift.”
Link to the rest at The Wall Street Journal
Some B&M stores are seeing increases in sales volume, but it seems to be the places like Target that have figured out how to combine the digital and B&M experience. Amazon has been working on it, but they are at a disadvantage in B&M because they don’t have the real estate or the experience on the physical store side.
B&N could — and I stress could, not have, or will– turn it around if they started using their stores well.
Visiting a physical bookstore is pleasant for many people and pulling a book from a shelf and falling in love is a good experience. Thirty years ago, I found their library-like stores attractive. B&N could figure out how to use their strengths instead of diluting themselves with food and trinkets. Make it easy to order on line and pick up at the store, give me a reason to stop by the store like my local indie bookstore has done with classes and author events. Invest in developing an effective POD system like Ingraham and Amazon have. My local B&N might see an uptick…
Oh yes. And for heaven’s sake, recognize indie publishing and figure out how to be a physical outlet for indie authors! That alone would save the bacon.
I think they officially gave up when they fired all their experienced stock receivers and managers. That was when they admitted their only plan is to get as much money out while they ride B&N into the ground.
That said, I think they handed Amazon a huge advantage when they refused to stock Amazon imprints. The sales copy for the zon’s brick and mortars practically writes itself, “Great stories you won’t find anywhere else!”
B&N has done few, if any, things right, but they could do better. I agree that it appears they are playing a very short and self-destructive game now. It drives me crazy that B&N could play their hand so much better.
That’s the most frustrating thing. They had everything, and just blew all their advantages. Though, it might just be bad karma from the way they buried all the independent bookstores.
Perhaps there’s something in their(Riggio and his team) software about the way they took them out that precluded them being more flexible?
Visiting a physical bookstore is pleasant for many people
Except not for ENOUGH people to keep B&N solvent.
I’ve used the airplane analogy before. Here, B&N is more like an airline that succeeded by flying huge jet planes all over, where their competition was flying turbo-props on limited routes. For awhile, people loved them – they went so many places, with such big planes, and tickets were 10% off!
But now, people are telecommuting, or they’re taking those new personal uber-jets, that pick you up at home and go right to your ultimate destination. B&N is stuck with these big planes and lots of empty seats. Sure, there are still SOME people in those seats, but not enough to pay for the planes. They can’t just sell the planes and buy smaller ones, because the planes are leased for 10 years at a time. B&N is trying to figure out how to get butts in those empty seats, but (to mix metaphors) that ship has sailed.
In the end it turns out that the turbo-props have much lower cost of ownership. Fewer seats, but more personal service. A place to pull a book off a shelf and fall in love, just not with as MANY books. We’ll see more of those, huddled in the shadow of dead B&N stores.
Terrance is correct. The situation has changed, and there is nothing B&N can do to affect it.
They remind me of Slim Pickens and his atomic bronco, though he seemed a lot more upbeat.
To add to the airline metaphore:
The people who are telecommuting are the business class flyers and the ones still flying Riggio Air are vacationers.
Back to books:
The majority of smaller stores surviving are doing it in one of two ways: either by a hyperlocal focus on what their community favors (AmazonBooks does this, too) or by focusing on everywhere books that move fast, new releases, plus a few perennials, like newsstands and the pharmacies. The heavy reader that values deep catalogs has mostly migrated to online and/or digital.
The few remaining B&M loyalists and the casual readers close to the big box stores may value the brand but their numbers are declining daily.
When the autopsy is performed, the point of no return will be identified as this march when instead of looking to reducing floorspace costs they chose to reduce staff cost…
…and capabilities.
In a nutshell: they lost track of their core customer.
Agree. B&N are not playing well. But not because they have an inherently losing hand. They could pull it out yet, but it will be very hard for them to jettison so much bad reasoning and choose a winning path.
I’m starting to think they’re running out of time and resources to do anything. Good or bad.
1- The entire company is valued at around $450M and their brand is supposedly valued at almost $300M. That doesn’t assign much value to anything else. That is pre-Parneros lawsuit.
2- They are still selling a fair amount of merchandise; around $800M in the last quarter: around $200M from toys and trinkets, $25M in Nook hardware and content, around $500M in pbooks. They lost $17M in the process. Paying Parneros would’ve grown the loss by 25%. And there will be a charge for shutting down the restaurants…
3- They fired the CEO in July but won’t even think about starting to look for a replacement in October? Sniff, sniff. That is odd, no? Or maybe not. If they start the search around Halloween they can extend the search past the holiday season so they don’t have to commit until they know if they will be around in 2019. That suggests they’re not sure they will be. At a minimum it means they’re heading into their “peak” sales quarter with what they have today.
4- At the conference call their ray of hope was that the sales decline was slowing down and their hope the new fall releases will produce a lottery winner.
5- Of more interest here: Nook gross sales of ereaders, ebooks, and Samsung tablets over three months was less than Kindle Unlimited’s lowest monthly payout this year. Not much of a lure for “going wide”, is it?
While people pine for somebody, anybody, to present at least a nominal alternative to Amazon, I’m thinking the best chance for that is that a B&N implosion might create a gold rush to fill the vacuum left behind.
“In chaos there is opportunity.”
Well, chaos is coming.
Or at least more KAOS. 😉
B&N’s survival won’t happen if they don’t jettison Riggio.
They? Who is they? The guy owns 20% of the company. He is they.
20% ain’t 51%. Other stockholders have rights, too. Howard Hughes was forced by the courts to sell his TWA stock due to his fiduciary mismanagement. Biggest check ever written to an individual at the time. Hughes took the $ and started buying Vegas casinos.
I’d guess his 20% and that of his like-minded stockholders is enough to keep things going the way they want (pulling as much money out of the company before it goes splat.)
Heck, Riggio might just be the figurehead for the ‘Let’s ride this flaming thing into the ground’ group, much as right now the news groups paint anything ‘good’ out of DC as ‘in spite of Trump’ and anything bad as ‘look what Trump did!’
It’s all a game and it looks like those in control are more interested in seeing how much they can get out of B&N before the crash rather than putting any real money back into it to avoid the crash.
Schottenfeld is back making a play.
From
https://www.fool.com/amp/investing/2018/09/07/why-barnes-noble-stock-surged-today.aspx
———————————-
In a fresh regulatory filing, the Schottenfeld Opportunities Fund disclosed that it had increased its stake in Barnes & Noble to 6.9%, up from the 5.7% stake it reported in July. Schottenfeld now holds just over 5 million shares, worth approximately $25 million at current prices. In the filing, Schottenfeld argues that shares are “substantially undervalued and represent an attractive investment opportunity.” The investor is also hoping that Barnes & Noble can be acquired.
Schottenfeld is in discussions with the bookseller’s founder and chairman Leonard Riggio, addressing numerous topics including “changes in Company leadership at the executive and board level, implementation of operational improvements, and the desirability of selling the Company.” Schottenfeld argues that Barnes & Noble is an “attractive acquisition target,” noting that its enterprise value currently trades at just 2.5 times fiscal 2019 EBITDA guidance. The fund calls it a “truly unusual bargain in the retail sector.”
Even without a sale, Barnes and Noble can improve operations with an increased focus on toys and games ahead of the busy holiday shopping season in the wake of Toys R Us shutting down, shifting away from physical media sales and toward “higher margin, higher sales-per-square-foot product categories,” according to the filing.
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So he recognizes that selling books doesn’t make money. Instead, he wants to make B&N into another ToysrUs, right down to the smothering hedge fund debt. What could go wrong?
“What could go wrong?”
For them, nothing. For whoever they beg/borrow/steal money from, everything …
Riggio and four funds together hold 50%. All funds hold 69%.
So, Riggio plus the funds hold 89%. These guys are not in it to promote literature or build book sales. They all know exactly what is happening. There are no starry-eyed investors in this specific game. Add banks and publishers and it’s great fun.
B&N is a sliver of their total holdings, and they have no intention of trying to change its direction. That’s not what they are good at, and they are smart enough to know it. These are the guys who bought it up when everyone else bailed. They will squeeze out everything they can, then try to get more.
God Bless the free market, for a trading floor knows no mercy.
Not all stock has the same voting rights.
Back in 2010 tbey had a proxy fight for control of the board and to remove a poison pill provision. The rebels easily mustered over 50% of total stock but not 50% of voting rights so Riggio carried the day.
To dislodge him involuntarily would take a lawsuit and proof of malfeasance.
He can and probably will “leave it as he found it” which I find amusing considering how the literati pinning their ADS hopes on him demonize objectivists.
https://www.youtube.com/watch?v=Dy6uLfermPU
Monty Python – Crunchy Frog
Fits this quite nicely … 😉
“A place to pull a book off a shelf and fall in love, just not with as MANY books.”
Especially if you don’t like the particular type of books that the trad pubs in New York are trying to push at us these days.
One pbook business model that is known to succeed even today is the genre-specific specialty shop. Placed in a high traffic location they tend to become destination stores.
Maybe the key to survive in the age of online is to stop trying to be everything to everybody and simply focus on a core subset with a vengeance. Be the best litfic store in the region. Make the store a premium experience worth premium pricing.
And as many noted on this site when they announced restaurants:
“In an earnings call today, B&N chairman Len Riggio indicated he does not have high hopes for Barnes & Noble Kitchen. “The top line on the restaurants is good; the bottom line is awful,” he said. “It’s a very mixed bag,” he said of the endeavor.
While the company will continue to improve its in-store Starbucks cafés, the restaurant concept appears to have played itself out, somewhat predictably perhaps, with the “essential problem being that we do not have a culture of running, operating restaurants,” said Riggio. “We have no experience in the hospitality area. Things like controlling food costs or payroll costs are not in our DNA.”
https://qz.com/1381303/barnes-noble-says-its-restaurants-are-not-succeeding/amp/
Since they’ve let go all their experienced bookselling store level employees they don’t have experience in bookselling any more either.
I went to our local B&N once last year. It was depressing. I wandered the aisle in the genre’s I like… nothing was new to me… few of my Ebook authors were represented. I looked over the large format picture filled reference books which used to be interesting. Nothing seemed interesting enough to deal with a physical book especially when the same info is available online. The coffee in the cafe…. other places do it better.
I left depressed. I’ve often thought of what they could do to get me back. Nothing has come to mind.
“Right now, we aren’t looking,” Mr. Riggio said.
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Translation: “we can’t afford any more severance packages”.
Plus, “anybody we approach pulls out a crucifix and runs away real fast.”
A transcript of the call is here:
https://seekingalpha.com/article/4204553-barnes-and-noble-inc-bks-management-q1-2019-results-earnings-call-transcript
Other delusional quotes I have seen from the call…
Why would their focus ever be anything other than growing their top line? (aka “making more money”) — ?
The days of “Driving traffic to the stores” is over, unless they send out an Uber driver with a cattle prod.
I found one of the comments to this WSJ article particularly relevant…
Everything they say is just fluff aimed at investors, “Please don’t bail on us! This time we have a secret weapon that will turn finally everything around!”
It’s all promises of magic beans.
Yeah, lots of stabilizing to do when you’re snowboarding on a trashcan lid and the hill is now at a 45 degree slop …
Dang it, does even Amazon stock enough popping corn for this? 😉