Last Friday Barnes & Noble’s share price sunk to its lowest point since 1994. Continued decrease in same store and digital sales should make us book-lovers worried. What should Barnes & Noble do to survive Amazon?
Sometimes a graph is worth 81,079 words:
Barnes & Noble announced on Thursday that comparable-store sales had decreased by 6.4% (to $952 million) during the nine-week period ending Dec 30. Online sales (which increased on average for US retailers) dropped 4.5%. Also interesting to note that half of the deterioration in sales was attributable to drops in music and DVDs categories which were considered strong at Barnes & Noble.
The news sent Barnes & Noble’s shares to a nearly 14% free-fall, closing Friday at $5.57, the lowest point since 1994.
Since 1997, the first graph shows us, B&N’s share price dropped by 35% while Amazon’s share gained over 81,000%… Amazon’s market capitalization is over $592 billion, almost 1500X B&N’s $407 million market cap. What used to be the world’s largest book seller is now an extremely far number 2 (though still largest brick&mortar bookseller).
Barnes & Noble’s NYC flagship store used to be my favorite place in the world. To this day, if I have an hour to spare between meetings when I’m in NYC, a B&N store would be my preferred destination. Unfortunately, the company is struggling and this holiday season Santa didn’t bring any presents. The main source for the decrease in sales is, we all guess — Amazon. Amazon keeps pushing its Prime program, handing out trial memberships to 4 million people in one week this past holiday and had a record holiday season. It should be noted that Amazon has also opened 13 physical bookstores so far. Barnes & Noble, BTW, has 634.
In a blogpost last August I took you back in time to July 1998. B&N’s share price was almost $18 dollars. In a 1998 Fortune piece Nina Musk quoted Suzanne Zak, head of a money management group at Zak Capital, then a large Barnes & Noble shareholder. Zak told Musk of the day she began to take Amazon’s Bezos seriously. On July 24, 1998, she attended a meeting hosted by Amazon.com for analysts and money managers. Zak stated:
“Initially, like a lot of people, we were skeptical of Amazon,” she explained. “But at that meeting, listening to Bezos, a light bulb went off. I said, ‘We’re going to have a problem here.’”
Barnes & Noble’s CEO, Demos Parneros, only joined the company in November 2016 and was appointed CEO in April 2017. His game plan includes reducing B&N’s cost base, decreasing store sizes, and experimenting with in-store restaurants and bars. These moves make sense but I can’t see them making a significant and deep enough change.
I believe Barnes & Noble is still a very important brand. It’s the first name that comes to mind when you’re looking for a book store. It should be able to fight back — if it gets the financial, technological and logistical backing. I believe that with the right digital moves, and with a strong logistic backbone — B&N could actually have a bright future. Yet, with a $400m market cap, the likely scenario is a private equity backed acquisition, more cost cutting and/or short term investments, “financial makeup” etc. Being bought by a private equity firm won’t really make a huge difference or give B&N a proper chance to regain a leadership position
It has been used too much as a solution for struggling retail companies, but one can’t escape from picturing a knight in shining armor coming to save the brand: Marc Lore and the new dawn for B&N. Lore, a new retail celebrity, was the founder and CEO of Quidsi (Diapers .com) until it was bought by Amazon (who recently shut it down completely). Lore is now Walmart’s CEO for US e-commerce, after Walmart bought his latest company Jet.com (for ~$3 billion). Lore is currently best known as the retail world’s last hope against Amazon. He’s the John Snow, Luke Skywalker (or Jedi Rey). If anyone can make the impossible happen in commerce — it’s him.
It’s won’t be an easy or orthodox move for Walmart to buy B&N, but it wasn’t an orthodox move for Jeff Bezos to buy Whole Foods, was it? It has plenty of clear advantages and benefits for both companies. If nothing else — it will help Walmart fight Amazon in their home turn — books. Plus — we’re not that far from the holiday season, and that is when miracles happen.
So, Marc, on behalf of all us bookworms who love Barnes & Noble, please help.
If you are in favor of Walmart buying Barnes & Noble — clap ;-)