Mar 4, 201312:02 PMVan Lines
with Joe Vanden Plas
Feeling Guilty Over Barnes & Noble Brushoff
I appreciate the economic concept of creative destruction, but as a Kindle man, I feel like a co-conspirator in the potential decline of Barnes & Noble.
I say decline rather than demise because even though B&N expects to close one-third of its retail stores over the next decade, it’s not a lead-pipe cinch that it’s going the way of Borders. According to Mitchell Klipper, the chief executive of the company’s retail group, most Barnes & Noble stores remain profitable despite competition from those pesky e-readers, but how long will that last?
Ten years from now, it’s possible the chain will still have 450 to 500 stores, as Klipper recently asserted, but that’s a far cry from the peak of 726 stores in 2008. It’s also a fair distance from the almost 700 stores it had as of Jan. 23, not counting a separate chain of 674 college stores. As they say in business, “If you’re not growing, you’re dying.”
That explains why the recently announced cutbacks fed my guilt. I enjoy exploring Barnes & Noble stores, albeit less frequently these days, and I don’t want to spoil it for others. But I also love my Amazon Kindle and my Apple iPad, and therein lies the guilt, even if somebody got there (e-readers and tablets) before Barnes & Noble. I’m not alone. Digital downloads now comprise 22% of global book sales; five years ago, they were non-existent. Five years from now, they might claim up to half the market.
Perhaps my guilt someday will be assuaged by B&N’s Nook tablets for reading and entertainment, but they were late to the game and are playing catch-up. When competitors include Amazon, Apple, and Google, Barnes & Noble needs the Nook unit to keep gaining on them.
Reportedly, B&N was profitable in 2012, with $317 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), but that’s a red flag for me. Anytime I hear a company using EBITDA, I wonder if the wolf is at the door. And when business evolution excludes store growth, when annual store sales drop 11% in 2012, and when holiday sales (at stores open at least one year) fall 3%, excuse me for wondering.
In the September 2012 edition of In Business, we posed the question: Is print dead? The conclusion was no, but long-term survival will require adjustments. Perhaps one of those adjustments will involve B&N snagging me by hook or by Nook.
Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click here. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.