Can Barnes & Noble Write A New Chapter For Itself?
Barnes & Noble has a potential deal in place to sell itself to hedge fund Elliott Advisors for $683 million, marking major changes for a company that has long struggled to stay afloat in the wake of Amazon’s continued rise. Representing the last of the major traditional bookstore chains, Barnes & Noble could be in the hands of a firm that already has turned around one bookseller that had teetered on the brink of failure: UK-based Waterstones. James Daunt, CEO of Waterstones, will assume the role of CEO of Barnes & Noble following the expected completion of the transaction in Q3 2019.
However, Elliott isn’t the only entity seeking to reverse Barnes & Noble’s fortunes — book reseller Readerlink LLC is reportedly working on a higher bid for the retailer.
The RTP editors discuss whether a Barnes & Noble acquisition (whether by Elliott Advisors or another party) can help turn the brand around.
Adam Blair, Editor: I’m at least somewhat optimistic about the prospective new owners of Barnes & Noble, particularly since incoming CEO James Daunt has had book retailing experience. I hope he imports the kind of locally-led assortments that have proven successful at Waterstones and also in the U.S. at chains like Half Price Books. Carefully listening to what local readers are interested in, and stocking stores accordingly, is what has kept the country’s remaining independent booksellers afloat in tough times. One recommendation for the new owners: revamp the Barnes & Noble loyalty program. I’m an ex-member who got tired of being charged $25 per year for no appreciable benefit. Amazon can get away with charging for Prime membership because they bundle exclusives, content and free, fast shipping, but Barnes & Noble isn’t Amazon — nor should it try to be. Keep making the store a place that’s a pleasure to visit and you’ll get my loyalty.
Glenn Taylor, Senior Editor: Upon first glance, the Barnes & Noble bid made me question the price: $683 million?? (Or, a less pricey $475 million when not accounting debt.) Frankly, I thought that number was outrageous given the company’s failed attempts at reinvention in the past, its inability to generate consistently positive traffic numbers and its rotating carousel of CEOs (now on number six since 2010). It’s even crazier when you think that the figure represents a 43% premium over its share price. Looking deeper into this though, I’d like to be optimistic about the buyer, Elliott Advisors. It’s easy to give hedge funds and VC-types flak for retail purchases like these (and they certainly have deserved it in recent years), but Elliott’s turnaround of Waterstones instills confidence that the company has a firm grasp of bookselling in the digital age, and that’s what matters most here. This feels more like a genuine attempt at a resurgence than a typical investment, largely due to Daunt’s involvement. Regardless of the ownership change, Barnes & Noble will have to close more stores (or at least align with the small-format trend), retool its inventory entirely (catering to its market), emphasize BOPIS/click-and-collect and endure short-term hits to its revenues and profitability.
Bryan Wassel, Associate Editor: I’ll admit I’m of two minds about Elliott Advisors’ ultimate plans for Barnes & Noble. While the firm has been supportive of Waterstones, its involvement didn’t come until that chain had already stanched the bleeding and started expanding again. That’s a great point for VC money to come on board — the extra cash can ease the growing pains of expansion plans, and the recent increase in profitability limits the incentive to tear the chain apart in search of a return. On one hand, giving the reins at Barnes & Noble to Daunt, as opposed to a sacrificial lamb whose only purpose is to quietly prepare the company for liquidation, speaks to the idea that Elliott is serious about financing a turnaround. On the other hand, the U.S. market is incredibly different from the UK, and America simply may no longer be capable of supporting a bookstore chain the size of Barnes & Noble. After all, there hasn’t been a truly national supermarket since the mid-20th century heyday of A&P, and we saw how that story ended. If Barnes & Noble’s suitors are looking to say, “We tried, but the company was doomed before we arrived,” they will certainly have ample cover.