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Industry News: “I have no confidence in this company (B&N) surviving”

June 29, 2013

A couple years ago, this blog–among others–started a periodic death watch on Borders. It wasn’t that anyone was looking forward to the company’s dissolution. It was just that the handwriting was on the wall. It wasn’t a matter of if, but when.

If the punditry’s right, we may be entering the same stage with Barnes and Noble, as well. Yahoo quotes one analyst as having “no confidence in this company surviving.” Before analysis, though, let’s start with the news:

  • The Nook line of e-readers and tablets is dead. Although they’ll be sold through the end of the year (at deep discounts), Barnes and Noble is getting out of the tablet business. Instead, it will concentrate on co-branding opportunities with business partners, including Microsoft.
  • Barnes and Nobles’ financial statements were a disaster for the fiscal year that ended in April. It lost $155 million in fiscal 2013, compared to $66 million in fiscal 2012.
  • The company lost $475 million in its Nook division, after sales collapsed by 34% in the fourth quarter of the year.
  • Even the retail segment suffered, with sales dropping 10% in the last quarter and 5.9% for the fiscal year.

There is some hope for the chain. Former chairman and founder Len Riggio is said to be seeking to buy the chain–thinking it could have a decent future. But analyst Brian Sozzi says that in order for the chain to survive, significant changes are required, including closure of many of the chain’s stores and a reduction in the size of each store. As Sozzi put it, “Barnes & Noble has these giant, hulking stores and you don’t need that in this digital age.”

What this means to you: Although B&N was far healthier than Borders, it hasn’t been a robust company for quite some time. And although its Nook product line was solid, and held its own for a while, other platforms inevitably caught up, especially as the market evolved from e-readers to tablets. Even Kindle struggled in the tablet market, with its Kindle Fire seeing disappointing sales over the holidays.

Meanwhile, the iPad mini (which is a very good platform in my experience) and various other tablets are now competing head-to-head, particularly with the Nook. One problem is that operating system–a proprietary version of Android that only runs the apps you can get through Barnes and Noble. You can “jailbreak” the operating system–that is, convert it to Android–but you void the warranty.

In short, if you’re looking to buy an e-reader and you don’t care about much more than using it for an e-reader, a Nook might be a good buy right now. Otherwise, don’t buy one.

Does it mean Barnes and Noble is doomed? Although the handwriting was on the wall for Borders for a long time before it shut down–and the outlook for B&N isn’t rosy–there are still possibilities. Without the massive money sink going into the Nook line, the bottom line immediately improves. And unlike Borders, which could not find a buyer at the end, Barnes and Noble has at least one suitor. So while things aren’t particularly bright, it’s probably too early to buy a black suit for the funeral.

If they do crash and burn, what does that mean? Most people buy books online now, especially people reading e-books (duh). Should Barnes and Noble vanish, though, a number of large cities will be left without book stores. The closest bookstore to my house in Tampa would be forty minutes away. The opportunity would potentially arise for new stores to fill the void. These stores probably wouldn’t have the giant retail space that B&N has. They would be like…small, independent book stores.

One Comment
  1. June 29, 2013 8:04 am

    Small independent book stores? My heart’s a-flutter. That’s what I’ve been missing all along, ever since B & N gobbled them all up. I visited a lovely independent bookstore while traveling earlier this year and wished upon a star that there was even ONE like it near me in Orlando. I’ll miss physically handling the books at B & N, but if its ultimate demise means a chance for the small guys to rise from the ashes, it’s not all bad news.

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