Barnes & Noble Showing Signs of Cracking Under Amazon Pressure
Mark Angelo, CEO, Yorkville Advisors
Barnes & Noble, the big box bookseller that has outlasted nearly all of its competition, seems to, finally, be experiencing some of the sales drag that doomed predecessors like Borders and Waldenbooks. Recent media reports say sales at the chain have fallen about 8 percent, leading to massive losses. Sure, eight percent may not sound like a lot, but in this business, with these margins, it’s tough. Market watchers are pointing a single finger at the reason for the loss, though: No more magic.
For years, Barnes & Noble flourished under the massive attention of fans of the Harry Potter books. They clamored for each new installment. At the height of the craze, there were even midnight parties and people arguing over the boxes the books came in. Those days are, presumably, gone for at least a while. While J.K. Rowling released a new Potter world book last year, “Harry Potter and the Cursed Child” there was no such new Potter book this year. Thus, no people coming into the stores for Potter and staying to buy other books.
That “staying and buying more” was the real magic of the Potter miracle for booksellers. Customers ended up browsing shelves since they were already there, and finding a great many other books they loved. The Potter success also spawned many other similar series of YA fiction that appealed to all ages. Those books, in turn, led to sequels, spinoffs, and movies of their own. Now, though, that tap has slowed to a drip. Twilight is done. The Hunger Games is Done. Percy Jackson has proved popular, but not nearly as popular a draw as Potter. And a draw is what booksellers like Barnes & Noble and competitor Books A Million need to get people through the doors.
But that draw doesn’t seem to be coming. Barnes & Noble has already told investors to expect sales to be flat for the next six months or so, at least. As we know at Yorkville Advisors, stock fell 10 percent on this news, which puts shares down about 37 percent for the year to date. While there are some rumblings that the company might go private, that news isn’t what they really need to set things to rights.
Barnes & Noble, as with other larger retailers, needs people coming into the stores, and they just don’t have that. The old method of filling shelves with books, putting the coffee on and waiting for the throng just isn’t working anymore. They must find a way to adapt.
