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Len Riggio Blames Barnes & Noble’s Problems on Current Election Cycle and Not Mismanagement

3074499444_05843c0797_bB&N released its first-quarter financial report today, and in the follow-up investor’s conference call Len Riggio had a few choice words to say about the state of the retail industry.

It’s mostly hooey:

As our press releases and comments by Allen pointed out, the retailers arm is not good at this moment, in fact, it’s terrible. To better put, it is more than worse I have ever experienced in 50 years I have been in this industry. I believe the current trend can be traced precisely to the current election cycle, which is unprecedented in terms of the fear, anger and frustration being experienced by the public.

The preoccupation with this election is keeping them in home, glued to their TVs and at their desktops. Retail traffic by any measure and across all segments is close to a historic low point. I get this not from our own observations but in speaking to many of the CEOs of other retail companies.

There’s two problems with blaming the current election cycle.

One, B&N’s troubles date back years – almost a decade, in fact, and two, B&N’s troubles are not shared by retailers in other segments.

To name a few examples, CVS reported revenues up last quarterSo did Amazon. So did Lowes. So did Walgreens. So did Kroger. Even Walmart reported revenues up a smidgen drab, although Target reported a decline in revenues.

Barnes & Noble’s real problem (one of them, anyway) is not the current elections but the fact that B&N is in a retail segment which has largely moved online and left B&N holding leases for retail space which is now too expensive to fill with books. (The other problem is mismanagement.)

This is a problem unique to bookselling and a few other retail segments which, as a matter of historical fact, are in decline and have been in decline for years as more and more sales move online.

It is not a new trend created by the 2016 presidential elections. That is why I sincerely hope that Riggio is lying to us, because if he is really that misinformed then Barnes & Noble is fucked.

If Riggio really believes that the current election cycle is responsible for B&N’s woes, god help us all. As a major shareholder he is in a unique position to run the company into the ground.

This would put tens of thousands out of work, leave hundreds of empty store fronts, and basically hand the US book market to Amazon.

Could someone do us all a favor and either talk some sense into Riggio, or failing that smother him in his sleep?

image  by James Cridland

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Fjtorres September 8, 2016 um 8:14 pm

I think we are looking at the latest zombie meme du jour.

Remember, a couple weeks back, the PW article on the awful june numbers for the latest tentpole releases by the big name authors floated the same excuse for the slow sales and the lack of buzz for this years "bestsellers".

Blaming the election is a quick and dirty smokescreen and a way to avoid admitting they are screwed. It buys them a fig leaf until march when they can blame it on a bad winter, Trump winning, the new trade war, or whatever disaster comes next.

When non sequiturs are all they can throw out there they are really and truly toast. Sorry for the employees. Time to update the resumes and start hunting.

Fjtorres September 8, 2016 um 8:21 pm


"Publishers have been expecting difficulty getting media attention for their books in the second half of 2016, as coverage of the presidential election dominates the various media outlets where authors usually drum up publicity. But in the first half of the year, the news cycle was already focused on the unusually entertaining Republican primary campaign season and news about terrorist attacks and police shootings. “Current events have gotten in the way” of publishers’s efforts to promote new books, said Carol Fitzgerald, president of The Book Report Network."

Shirley Dulcey September 8, 2016 um 8:26 pm

Amazon sales being up would support his theory, not refute it. People staying at home still need stuff and therefore will order it online. CVS and Walgreens sales might also; if people are staying close to home they might be spending at those nearby stores rather than venturing farther afield.

In any case, I don’t think it’s mismanagement. It’s mostly the fact that they’re in a line of business that is in trouble. Short of exiting the business of selling books and turning themselves into another kind of store altogether there isn’t a heck of a lot that B&N can do.

Fjtorres September 8, 2016 um 9:07 pm

B&N sells online, too.
They sell digital.
They do both things poorly.
So yes, it is mismanagement.
Signing up to sell a million Samsung tablets at a time tablet sales are tanking is mismanagement.
Trying to undercut Amazon on ereader pricing in 2010 was mismanagement.
Selling ereaders that supported Adobe ADEPT epub but refusing to sell Adobe ADEPT ebooks was mismanagement.
Failing to manage inventory and ending up with a zillion unsold Nook STRs was mismanagement.
This isn’t hindsight being 20-20: We can sit here for hours discussing all the bad management moves B&N has made over the last six years and almost all of them were head-scratchers from the beginning. Their entire value system is just plain screwy.

Smart Debut Author September 8, 2016 um 9:30 pm

This quarter, unprecedented levels of sunspot activity impacted book sales, further hurting a publishing industry still reeling from last quarter’s sudden increase in Pokemon-Go play and the previous quarter’s outbreak of the Zika virus…

Fjtorres September 8, 2016 um 10:50 pm

Looking forward, the Perseid meteor shower will present an added challenge in getting people to drive 50 miles round trip to discover the book they want isn’t in stock.

Nate Hoffelder September 8, 2016 um 11:19 pm

Let’s not forget Mercury going into retrograde; that’s going to screw with literary purchases.

MKS September 9, 2016 um 12:17 am

Well, since they know what the problem is, what are their plans going forward to mitigate that damage the election is going to do to the Christmas season shopping? Will enough bookstores be selling alchoholic beverages by then? What about legal marijuana?

Richard Adin September 9, 2016 um 2:56 am

Definitely mismanagement, especially in the customer service sector, of which I have complained for years. But the press release emphasizes it even more. The release is illiterate, exceptionally poorly written (assuming Nate has quoted it accurately, which I expect he has). What kind of billion-dollar organization puts out a release with a sentence like "To better put, it is more than worse I have ever experienced in 50 years I have been in this industry."?

Nate Hoffelder September 9, 2016 um 6:12 am

That’s not a release; it’s a copy of the transcript of what Riggio said on the conference call.

BDR September 9, 2016 um 4:19 am

Nobody expects truth in these conference calls, but they at least expect the effort to tell a good lie.

This fool is too incompetent to meet even *that* low bar. The REAL problem with B&N? It *was* their hiring practices; bringing in a continual stream of folks who had no concept of their changing industry.

NOW their problem is gravity. With all of the failed strategies and missed opportunities, they’re pretty much doomed. They’re in a nosedive headed to earth and it would take an extraordinary turn-around artist to save them. With their market shrinking and their prospects diminishing and their debt growing to (soon) crushing proportions, they’ve got no hope EXCEPT a takeover.

So who wants them as a takeover target? Amazon, maybe, for their retail stores. Maybe Rakuten — at a much lower price of maybe #3 per share — for the same reason. A consortium of Big Pub, perhaps, in an attempt to stave off the inevitable collapse of the paper book. It’s kinda hard to see how that last one would work though, since Big Pub is in worse shape than B&N.

In any event, B&N has gotta suffer through even more pain before they’re small enough to make them a takeover target. We can suspect THAT’s what the new management’s focus will be: Prop up their retail properties as their only viable asset and jettison everything else: Nook, e-commerce, everything. Turn their retail into bars and coffee houses selling nick nacks and the (occasional) book until someone rescues them.

Will it work? Probably not, the retail thing didn’t save Borders, b. Dalton, or the long list of others who’ve come and gone without even a whimper. Amazon’s in a different place now, though, so maybe.

Fjtorres September 9, 2016 um 8:43 am

Oh, the BPHs have the cash to (collectively) buy B&N. The randy penguin could do it alone. Their problem is they need to shovel their money out to their corporate HQs every quarter and won’t be allowed to spend it on something so risky as preserving B&N’s remaining shelf-space.
I don’t see B&N totally disappearing.
I do see them going through Chapter 11 reorganization and closing down a majority of their stores, shrinking down to 50-100 "destination" stores in big metro areas, and then slowly building out a new chain of smaller strip mall stores and revamping (yet again) their online storefront. Best case scenario, though.
Worst case scenario is Riggio keeps trying to make the warehouses work for too long and they end up in Chapter 9, somebody buys the name and builds the distribution system and reinvents jobbers as was recently suggested.

Fjtorres September 9, 2016 um 8:45 am

"Builds out the distribution system".

Frank September 9, 2016 um 9:05 am

B&N has made many mistakes, such as: spinning off the college bookstore business that is making money & investing in Nook by buying the shares held by other companies.

To try to save itself, it needs to offer store within a store, like allowing Samsung to have a kiosk inside to sell stuff.

Shirley Dulcey September 11, 2016 um 10:36 pm

I don’t know how much longer the college bookstores will continue to make money, though. They’re dependent on the textbook cash cow, and students and instructors are pushing back against the model of high priced textbooks. Instructors are instead turning to alternatives like issuing much less expensive self published ebooks or basing courses on a few non-textbooks. Students increasingly buy or rent used textbooks.

On some campuses, college bookstores may continue to thrive by focusing more on non-book items. Licensed college clothing and other items remain popular, and many campus stores devote as much space to such non-book items as they do to books. Bookstores at schools like Harvard and MIT and Penn State will do fine, but the bookstores at smaller and less famous schools will struggle because their merchandise isn’t as popular.

Kate September 9, 2016 um 11:53 am

Perhaps you should drink you coffee BEFORE you write your headlines? Just LOOK at that thing.

Kate September 9, 2016 um 11:54 am

And of course I mean 'your coffee'. It’s OK to slap me now.

Smart Debut Author September 9, 2016 um 11:57 am

No, I think that’s not a typo, it’s Nate coining a new phrase:

"Mismamanagement" : when a company’s so badly managed, it makes the shareholders miss their mamas.

What Will Happen To Ex-B&N Stores After the Company is Gone? | The Digital Reader September 9, 2016 um 2:05 pm

[…] with Barnes & Noble CEO Len Riggio apparently determined to run the retailer into the ground, now is as good of a time as any to start brainstorming ideas for what can be done with the soon to […]

Mark September 9, 2016 um 2:06 pm

I don’t think you can go by what Nate has excerpted alone.

The WSJ didn’t even report those remarks, but it reported these, from presumably the same investor call:

"Leonard Riggio, who took over as acting chief executive of Barnes & Noble Inc. in August, told investors on Thursday that the bookseller “shot itself in the foot” by cutting store personnel and aggressively reducing in-store inventory.

"Mr. Riggio, 75 years old and the retailer’s largest individual shareholder with a 17.8% stake, said he is now addressing those mistakes.

"“The last place you take expenses out is on the sales floor,” said Mr. Riggio, during an interview following a call with investors. “We also pared the inventory back at the wrong time and in the wrong places. If you want to reduce 10 copies to five, you can replenish. But if you have one or two, that’s a problem.”"

Nate Hoffelder September 9, 2016 um 2:24 pm

Well, everyone is welcome to click through the link and read it for themselves.

But you do have a point; right after the excerpt quoted above, Riggio said:

Having said this, we did shoot ourselves in the foot somewhat by making unprecedented inventory reductions, which were ill advised by cutting expenses in the worst areas, mainly retail floor personnel. These conditions are being remedied as we speak, at the same time, we are poised to execute our plan to reduce expenses by attacking areas which are not sale sensitive and we will continue to spend money wisely on initiatives which will build sales in the bottom line.

Make no mistake about this, we will be smart about what and where we spend, but we intend to grow this business. We remain the best at what we do, we have great people throughout the entire organization and we look forward to a great holiday series, which will begin this year in the post-election period when I expect what I call this retail malaise to be over.

One could argue that be leaving the first paragraph out, I changed the context. But the second paragraph demonstrates how disconnected Riggio really is, so really they cancel each other out.

Fjtorres September 9, 2016 um 3:41 pm

He has to be disconnected if he thinks he can *grow* their B&M business. He needs to be triaging and angling for a soft landing.

Liz September 9, 2016 um 5:54 pm

Riggio needs to sell his stake to someone who actually has a plan. He has no plan and there is a chasm of leadership at B&N. I think the stores could be fine if they could just quit changing their minds every 5 minutes about what they want to do or what direction to head in. They don’t commit to any one path before changing direction. Its frustrating to say the least.

What Will Happen To Ex-B&N Stores After the Company is Gone? #repost | Motown Writers Network . . . Michigan Literary Network September 10, 2016 um 5:27 pm

[…] with Barnes & Noble CEO Len Riggio apparently determined to run the retailer into the ground, now is as good of a time as any to start brainstorming ideas for what can be done with the soon to […]

gingeroni September 12, 2016 um 4:51 pm

They need to fix their stupid web site. I just checked to see if I could find a popular book on their shelves and the page has stupid spinners that never finish. From what I can see, they still don’t show store inventory. Heck, Home Depot shows store inventory and even the aisle number. I used to do "reverse" show rooming with Borders that way. I’d find a book with good reviews on Amazon then pick it up at Borders during lunch. I still miss Borders.

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