Michael Hiltzik: Barnes & Noble saved itself by putting books first. Imagine that

Michael Hiltzik, Los Angeles Times on

Published in Business News

It wasn't long ago that Barnes & Noble seemed to be on the glide path to extinction.

At the end of 2018, the giant bookselling chain reported its seventh quarterly loss in a row, red ink of $27.3 million on sales of $117.2 million. Its management was in turmoil: That summer, Barnes & Noble fired its fourth chief executive in four years. Over the previous decade, it had closed 98 stores, shrinking its retail footprint to 630 locations from 728.

The company, now 106 years old, was facing what seemed to be inexorable competition from the e-commerce behemoth and a shift among readers to e-books from physical books. But its ventures to compete head-on with Amazon by bringing out a Kindle-like e-book reader called Nook and selling books online from its website have never amounted to much.

In the summer of 2019, Barnes & Noble was bought by the hedge fund Elliott Management for $683 million, almost half again what stock market investors thought it was worth.

Upon taking over, Elliott installed James Daunt as Barnes & Noble CEO. The Cambridge-educated Daunt had started his own chain of independent bookstores in Britain, then taken over as CEO of Waterstones, a floundering British bookstore chain that Elliott had acquired in June 2018.

Daunt, 59, turned the chain around to the point that he became known as "the man who saved Waterstones." To some in the book industry, Elliott's acquisition of Barnes & Noble looks like an effort to double down on Daunt's management skills. (Daunt is serving as CEO of both companies.)


"Barnes & Noble was suffering a remorseless erosion of book sales as they put more and more things that weren't books into their stores, which weren't selling," Daunt told me by phone from Cary, North Carolina, a stop on an inspection tour of Barnes & Noble stores on the Eastern Seaboard. "Since then, we've changed the balance of product within our stores and focused dramatically more on books."

The result, he says, has been a "nice and healthy increase in overall sales, driven by a significant increase in book sales." Daunt evicted "a ton of completely irrelevant products" that occupied the stores' shelves — batteries, electronic chargers, water — "a ton of products you'd find in a CVS or Target where they perfectly sensibly sell you everything you need for everyday life, but which made absolutely no sense in a bookstore."

What's left are books, of course, plus some music CDs and movie DVDs, educational toys, puzzles, board games and paper goods such as journals, notebooks and greeting cards. "We concentrated on things that support the core book offer and which a book-buyer would intuitively think should be in a bookstore, including anything to do with writing."

How well Barnes & Noble is doing today is a bit of a mystery because as a private company it doesn't release profit-and-loss figures, but its publicly announced expansion plans provide a good indication. The chain is expecting to open about 30 stores this year, adding to the 22 it has opened in its last fiscal year.


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