Borders, Barnes & Noble get a boost for the New Year

Jan 05 2009

My email inbox this morning had the usual weekday email from Publishers Weekly, and it was chock full of news from the two largest booksellers in the US, Borders and Barnes & Noble. Now that the holidays are over and we are into 2009, many in the retail industry are probably taking stock of the dismal holiday shopping season and going into "survival mode" for the foreseeable future.

Let’s start with Borders first. It appears from this article that the struggling retail chain will be getting some new blood in management:

With its stock price trading below 50 cents and holiday sales down by double-digits, the Borders Group’s board of directors has replaced CEO George Jones with Ron Marshall, a retailing veteran whose background includes overseeing the turnaround of Pathmark and the Nash Finch Company. Marshall also held management positions with Crown Books and Barnes & Noble college stores.

While Marshall definitely has the experience and qualifications to stand at the helm of Borders, the larger question remains: How will the economy behave over the next year. If jobs are being lost and people don’t have disposable income, they’re going to buy less books, guaranteed. Yes, I realize there are many more factors than that, but in a down economy products like books tend to suffer.

What strikes me as interesting is that not too long ago Borders was looking for a buyer. Then, they announced that they had taken themselves off the market and now have a new CEO. This suggests that maybe things aren’t as bad as we have initially been lead to believe. Maybe they have an ace up their sleeve we don’t know about, or maybe Mr. Marshall is that ace.

Barnes & Noble gets new investor

In a smaller and somewhat less surprising story, bookseller Barnes & Noble has a new investor, according to this article from PW:

Yucaipa American Management, the investment arm of supermarket mogul Ron Burkle, has acquired an 8.3% stake in Barnes & Noble. In the SEC filing made Friday, Yucaipa said it has acquired the shares because they "were undervalued by the market at the time they were acquired."

B&N has been in a much better position than Borders going into the holiday season, and I still believe they’re in a good spot (as good a spot as they can be in, given the economy) today. With no major debt and tight control of spending, B&N stands a good chance of weathering the economic storm and seeing sunnier days.

I’m no market analyst but Yucaipa American Management must see something in the bookseller to buy an 8.3% stake in the company. And being undervalued might be a good sign because it’s saying that the company isn’t getting enough credit for its position in the market.

I also came across this article from the Wall Street Journal about the new B&N investor. WSJ gives a pretty glowing outlook for Barnes & Noble:

However, Barnes & Noble has an excellent balance sheet and a highly regarded, stable management team. Given the troubles currently faced by Borders Group Inc., the nation’s second-largest bookstore chain, Barnes & Noble could conceivably expand its market share this year at the expense of its rival.

I could be totally off base and have no idea what I’m talking about. Remember, I majored in English Literature and philosophy in college, not finance. Either way, I do truly believe that people will keep buying books and we’ll see these retail giants for many years to come!

2 Responses

This might sound obvious, but for many years now, I’ve felt that both the publishing and book selling industries have failed to embrace technology – specifically the web.
Books and authors have a miserable web presence if you ask me.
Publishers buy too many books and don’t offer enough marketing to the authors. The traditional book sellers have yet to match Amazon in online presence.
Don’t even get me started on how they need to put out more books for gadgets.
The music industry finally started figuring it out (thanks to iTunes) so when will the publishing industry get on board?
One more thing I want to mention is waste – did you know that if a bookstore fails to sell the copies of a book that it’s ordered, they tear off the covers and it goes to recycling or even garbage? That’s just ridiculous in this day and age.

Melissa Donovan 1/5/2009 8:52 pm
Hi Melissa!
Thank you for your comment!
Publishers and booksellers alike are very slow to embrace any kind of change. But I think it is happening slowly. Some publishers are offering free ebook titles of their authors with upcoming book releases, for example.
The issue with book returns – when booksellers return unsold books to the publisher, is also controversial. Hopefully this will become a thing of the past as the industry embraces more technology and uses different models for selling books.
Luckily, book publishers don’t appear to be quite as stubborn as the music industry has been. At least publishers haven’t started suing people yet!
Brad

Brad Vertrees 1/5/2009 9:06 pm