Barnes & Noble got a lot of bad press a few weeks back when they reported abysmal holiday sales, but it turns out they're not the only ones. The German bookseller Thalia and the Canadian bookstore conglomerate Indigo have each reported an unexpected drop in sales for the last quarter of 2012.
Thalia, a chain of 298 bookstores, reported that sales were down 2.5% in the October through December period. The German stores dropped the most, averaging a 3.7% decline in sales, while Thalia's stores in Austria and Switzerland saw a 1.2% decrease in sales.
Indigo, the company that used to own Kobo, saw a 4.9% drop in net revenue across the various chains (Coles, Chapters, Indigo):
Revenue for the quarter was $335.6 million. The decrease was due to lower eReader revenues and declining book sales, as consumers shift to digital reading, and the absence of any hit books as against two blockbusters last holiday.
So one detail that can be learned from this is that Barnes & Noble wasn't the only bookseller to have a bad quarter. If you want to argue misery loves company then this is a good thing. But there are also a couple important details that separate Thalia and Indigo from Barnes & Noble. Both of the other chains are in a much better financial condition.
Indigo might have seen a drop in revenue, but their gross profit grew due by 2.2%. Indigo attributed the growth to "a shift to higher margin gift and lifestyle products, lower sales discounts, fewer markdowns, and shipping more products through the Company's distribution centres". And even if Indigo had seen a poor quarter, they also sold off Kobo last year so they don't have a debt problem or a need to invest capital in developing new ereader hardware.
And Thalia is owned by Douglas Holdings, a German retail conglomerate. Douglas as a whole saw a 1.5% increase in revenue. That means that even if Thalia's revenues don't improve they can afford to carry the bookseller for at least a little while.
Update: David Gaughran pointed me to a story I had missed. The UK based Waterstones also had a poor Christmas quarter but still managed to boost sales by 5%. The managing director, James Daunt, is confident that he will be able to turn the company around.
None of the bookstore chains are in as bad of a situation as Barnes & Noble. Of course, we don't yet know B&N's true status; they will not release the latest quarterly statement for another few weeks (it covers November, December, and January). All we know at this point is that the company revenues for the 9-week holiday season dropped 10.9% from the year before.
When I reported on that detail a few weeks back I said that it was terrible news. Now that we have the perspective of comparing B&N's news to nearly as large chains in other countries it's clear now that I was not completely wrong.
B&N has not one but 3 millstones around their neck. Revenue and especially retail sales are down (and sales of Nook dropped even more) while at the same time B&N has to continue to invest in Nook hardware.
Considering that B&N is carrying debt equal to about half their stock market value (Forbes), it's pretty obvious that B&N really is in a dire state.
At this point it is going to be hard to dispute that B&N is close to following in the footsteps of Borders. B&N is the slow, fat guy in the zombie movies and the undead are approaching fast.
From the outside it looks like B&N is going to need 2 things to save them. First they will have to sell off Nook Media and get out from under the debt cloud. Next they will need to find someone who can swoop in and save the company by forcing a massive change in the corporate culture. IMO the main reason B&N is in its current state is that the current management is running the company into the ground.
These are the folks who think that the way forward is to give up market share and shrink down to only 500 stores. These are also the folks who thought it was a good idea to spout that crazyness to the WSJ as their plan for the future. (Sidenote: That blunder and the public perception of B&N's imminent demise it created is the 3rd millstone around B&N's neck.) These are the folks who continued to invest huge sums in proprietary hardware even as sales dropped in 2012. These are the folks who decided to sell off Nook Media piecemeal rather than as a single unit.
TBH I don't see any of that happening. Saving B&N will require radical decisions and the current management just doesn't seem capable of it.
If B&N is still around in January 2014 (and not in bankruptcy proceedings) I will be terribly surprised.
image by Joelk75