Barnes & Noble Closures: 100s Of Stores To Go According To Top Executive

Posted: 01/28/2013 9:28 am EST | Updated: 01/28/2013 3:06 pm EST

Barnes & Noble's top store executive Mitchell Klipper has told the Wall Street Journal (subscription required) that the company plans the closure of at least 20 stores a year for the next decade.

Since 2003, the company has shut an average of 15 stores a year - but it also opened more than 30 per year, according to the Journal. During the last fiscal year, however, the company closed 14 stores and didn't open any. This year, a prominent Manhattan store has already shut its doors.

Without any new openings, that rate of closure would reduce the total number of Barnes & Noble's stores by a third - it currently has 689 retail stores, and 674 college stores. Their first store opened in New York City in 1917, and since the closing of Borders in 2011, it is by far the nation's largest book retailer chain.

Store revenue over the recent holiday period was down 11% on the previous year, however the company still made $317 million in earnings last year, more than enough, according to Klipper, to offset losses from the Nook ereader section of the company, which spends heavily on advertising and new technology.

Almost exactly a year ago, the WSJ ran an article questioning if the Nook part of the business was to be split off into its own company, though so far this hasn't occurred, and in April 2012, Microsoft invested $300 million in a new Nook subsidiary.

Print book sales nationwide dropped 22% over the past five years according to Nielsen BookScan, as ebooks and other digital devices have become more popular. Where that leaves the retail side of Barnes & Noble's business in the medium term is unclear.

According to the Journal,

Barnes & Noble is turning to an age-old partnership to help it revive its business: literature and alcohol. The New York bookseller says it is opening four "concept" stores in the next year that will feature restaurants with an expanded menu including beer and wine. The first concept store will open in Eastchester, New York, in October, followed by locations in Edina, Minnesota; Folsom, California, and Loudon, Virginia. The company said Thursday that it had named its chief operating officer, Jaime Carey, to head a newly created restaurant division. Barnes & Noble on Wednesday reported lower total sales and lower sales in established locations in its most recent quarter. Read more on Colorado Springs Gazette ...

It could be because that they are about to go under. Stocks are taking a nose dive and I can't think of another book analogy since the Guardian said it could be their final chapter.

Barnes & Noble is hoping for a storybook ending. The ailing bookseller said Wednesday that it's exploring strategic alternatives, including a possible sale of the company.

One possible buyer: Barnes & Noble founder and Chairman Leonard Riggio, the company said in a news release, while noting that "multiple parties" had expressed interest in bidding for the company.

Barnes & Noble, which is publicly listed, is the nation's largest retail book vendor, operating 629 stores across the U.S. It also operates Nook, a digital bookstore, as well as the website barnesandnoble.com.

The company's board has set up a committee of independent directors to oversee the strategic review. Riggio, who owns 19 percent of the company and is its largest shareholder, has pledged to back any transaction the panel recommends.

Barnes & Noble shares, which before news of the possible sale were down 30 percent for the past year, vaulted 21 percent in Wednesday's after-hours trading to $6.64. In announcing that it's weighing a possible sale, the company noted that an unknown investor has been rapidly acquiring its stock.

Annual revenue, which topped $7 billion in 2012, has since fallen to $3.7 billion amid ferocious competition from Amazon and other e-commerce companies. In September, Barnes & Noble reported quarterly revenue of $795 million, down nearly 7 percent from a year ago, as store sales continued to sink. It lost $17 million for the period.

Once demonized for killing off local bookstores with its superstores, Barnes & Noble has been struggling in recent years with competition from Amazon and changing consumer preferences.

"If they can pull something out to save the company that would be great, but they have a real uphill climb," said Craig Johnson, president of Customer Growth Partners. "They've hung in there despite Amazon and all the rest of it. But the bookstore that solely sells books and periodicals is unfortunately a relic of the past."

Despite the strong headwinds facing brick and mortar retailers, some analysts believe there's still a place for bookstores in readers' hearts.

"Consumers want unique experiences and escapes — we think they are finding that in independent bookstores," said David Schick, managing partner at Consumer Edge Research. "Consumers want to feel a connection to their stores. We do believe Barnes & Noble can make some enhancements that could matter, but it will take time and investment."

Riggio served as CEO from when Barnes & Noble was founded in 1986 through 2002 and then again from late 2016 through April 2017. The company has run through four CEOs in the past five years.

Whoever buys Barnes & Noble will have to find a way to bring something more to the table besides selling books, which are often available cheaper elsewhere, Johnson said.

"If it is Riggio, if he had some secret sauce to reinvent the bookstore for the 21st century, why hasn't he done that in his time there?" Johnson asked.

The company also says it's adopting a shareholder rights plan after noticing an unidentified party or parties rapidly accumulating its stock. The so-called poison-pill plans are often used by companies to defend themselves against hostile takeovers by diluting the value of a would-be acquirer's investment.

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