Barnes & Noble to be bought by hedge fund

[John F]

There was talk last year that Barnes & Noble could go bankrupt, so this is welcome news. I buy all my books from B&N (and everything else from Amazon), doing my bit to keep them afloat. Here's hoping that the new owners will actually run and improve the business and not just sell off the assets and cose up shop.

Eliott Management Agrees to Buy Barnes & Noble, Daunt to Run Both B&N and Waterstones
Porter Anderson
June 7, 2019


Elliott will pay some US$476 million for Barnes & Noble, having last year bought the UK’s main chain Waterstones. James Daunt is to run both companies.

Publishers Lunch’s Michael Cader writes that the deal is for “a modest $6.50 per share,” putting the value of the transaction at some $477 million, “plus the assumption of long-term debt makes the cash purchase ‘valued at’ approximately $683 million.”

James Daunt, who has had robust success with Waterstones since Elliott’s buy of the UK’s major bookselling chain on April 26, 2018, is to move to New York City later this year and is to run both companies—a daunting task, whether the pun is intended or not.

In a note to staff, Riggio writes:

“As you know, the Company has been seeking a new owner since October of last year. You should also know that there were many interested parties in the sale process, including others in our industry.

“The transaction will take several months to be completed since it requires a shareholder vote, and regulatory approval. During that time, our management team will work with James so that he can hit the ground running. They will also continue working on the many strategic initiatives which are already underway.

“As it happens, I know James Daunt fairly well, and I am delighted to have him as our new leader. He is a bookseller through and through, and I expect he will make a big difference in our fortunes. Like me, James believes our culture has to be more store-centric, which means more localization of assortments and operations. It follows that he believes local managers must have more authority to get the job done.

While Bloomberg’s Lauren Coleman-Lochner, Scott Deveau, and Matthew Townsend have reported a “surge” in the bookseller’s stock on Thursday by “as much as 36 percent to US$6.24, the most since 2012” on the afternoon’s speculation, Cader also pointed to the fact that the stock closed yesterday at $5.95 a share. The surge, in other words, was at the very small scale of a long-beleaguered stock.

Daunt: ‘We Counter Amazon’s Siren Call’

In his Friday write at The Bookseller in London—where for a year the UK market has watched Daunt lead Waterstones under Elliott’s ownership to profitability and the opening of new stores—Philip Jones is quoting James Daunt, defining his new dual role in the context of Amazon’s dominance in the bookselling market.

Typically, however, Daunt subtly and intelligently points out that it can be a matter of “ease” as well as “some evident reason” to blame the retail struggles of the industry on Seattle:

In Jones’ write-up, Daunt says, in part:
Waterstones James Daunt

“Physical bookstores the world over face fearsome challenges from online and digital, a complex array of difficulties that for ease and some evident reason we lay at the door of Amazon.

“Our purpose is to create, by investment and old fashioned bookselling skill, bookshops good enough to be a pleasure in their own right and to have no equal as a place in which to choose a book.

“We counter thereby Amazon’s siren call and defend the continued existence of real bookshops.

“We do so now with all the more confidence for being able to draw on the unrivaled bookselling skills of these two great companies.”

‘Relentless Competition From Amazon’

Coleman-Lochner, Deveau, and Townsend at Bloomberg on Thursday wrote, “Despite the relentless competition from Amazon, Barnes & Noble has managed to somewhat stabilize its business over the past few years, with revenue declines narrowing to a drop of 3.1% last year. The retailer still generates cash—sales were almost $3.6 billion last year—and the little outstanding debt on its balance sheet isn’t due until 2023. The company has also spent the past few years closing weak stores or moving them to better locations.”

At the same time, the Bloomberg article also pointed out that the chain’s effort to compete with Amazon’s Fire tablets with the Nook “was ultimately a bust” and that “internal drama” hasn’t helped...

https://publishingperspectives.com/2019 ... terstones/

[John F]

Barnes & Noble Can’t Blame Amazon for Everything
By Sarah Halzack
June 10, 2019

Barnes & Noble Inc. had been buyout bait for so long it should not have been a surprise when the company announced on Friday that Elliott Management Corp. had agreed to buy the big-box book giant for $683 million, including debt. The bookseller had said in October that it was exploring strategic alternatives. Even before that, smart observers such as my colleague Tara Lachapelle had noted it would be a tempting takeout target.

With Barnes & Noble shares not far off all-time lows, it was an opportune time for Elliott to pounce. Still, when the moment came, it seemed to be, if not exactly a shock, then certainly an important turning point. Without a doubt it was a humbling moment for a company that has been humbled again and again by retail’s massive transformation. Of course, Barnes & Noble was among the earliest companies to feel the punishing competitive pressure of Amazon.com Inc., with Jeff Bezos’s ruthless convenience machine putting books on shoppers’ doorsteps quickly and reliably. Bezos dealt Barnes & Noble another blow when his Kindle device ushered in the e-books era, threatening to exile the bookseller to oblivion the same way Apple’s iTunes doomed Tower Records and Sam Goody.

Given that history, perhaps it is inevitable that Barnes & Noble is a smaller, less influential retailing force now than it was at the height of its powers. But it was not preordained that Barnes & Noble become as irrelevant as it has.

As one piece of evidence, look at the extraordinary resurrection of Best Buy Co., the electronics chain that also experienced early encroachment from Amazon. Less than a decade ago, many industry watchers were convinced it was destined to crumble like rival Circuit City did. But CEO Hubert Joly gave people a reason to choose Best Buy — he made prices more competitive, drastically improved customer service and shored up its e-commerce offering. He didn’t let the company wallow in the past, ditching its 250 small-format Best Buy Mobile stores, which no longer made sense as the smartphone market matured. Under the leadership of Hubert Joly, Best Buy's market value has recovered from a 2012 trough

Barnes & Noble couldn’t have followed Best Buy’s playbook exactly; selling books is simply a different business from selling big-ticket items like 4K TVs. But Best Buy’s example shows it is possible for specialist retailers to remain differentiated and exciting in 2019.

Barnes & Noble even had a solid foundation to build on: It was an experiential retailer long before that term became an overused industry buzzword. Its cavernous spaces with plenty of seating let customers thumb through lots of books before settling on a purchase; its Starbucks cafes gave them permission to linger even longer.

Apple, often lauded as a retail visionary, started referring to its stores as “town squares” in 2017, a nod to the idea that it would be advantageous for them to be community gathering places. Barnes & Noble had understood the power of retail-store-as-hangout-spot at least two decades ago. And then it squandered it by not continuing to evolve how the concept was executed and by failing to marry it with a more compelling online shopping experience and e-reader.

Barnes & Noble’s new CEO, James Daunt, has some obvious opportunities to steady the chain, starting with slimming down. The company still has more than 600 physical stores. That number could soon prove unsustainable even for, say, Macy’s Inc., and the clothing and home goods businesses have not even shifted online as much as the book business has.
Daunt should also further reshape how Barnes & Noble’s allocates space in its stores. I was shocked on a recent visit to a Barnes & Noble store by how much square footage was still devoted to physical copies of movies and music. The company has experimented with remodels to condense those areas and use the space for toys and games. That seems like something worth rolling out chainwide, especially given the disappearance of Toys “R” Us.

Maybe some fresh marketing, too, could drive traffic to Barnes & Noble. Millennial parents are often worried about overdoing screen time for their kids. Why not court them with ads that will make them feel like Parent of the Year for taking their children to pick out an old-fashioned book?

Remember, even Amazon, Barnes & Noble’s mortal enemy, clearly believes in the enduring potential of the physical bookstore. It has opened several of them in recent years, a somewhat ironic bit of validation for Barnes & Noble’s legacy business.

Going private has been anything but a guarantee of salvation in retail. In fact, in several cases, it has been a prelude to grave trouble. Toys “R” Us, most notably, was forced to liquidate after it was crushed by its debt load. Private-equity owned Payless Shoe Source is now shuttering its U.S. stores after filing for bankruptcy; private-equity-backed Wet Seal and The Limited have vanished from the mall.

Barnes & Noble will probably never be the cultural and commercial force it once was, even if it doesn’t end up quite those dire straits. It has missed too many opportunities by now. But it still has a chance to write a next chapter that doesn’t include its demise.

https://www.bloomberg.com/opinion/artic ... everything

[John F]

James Daunt, the new head of Barnes & Noble, says: “Elliott expects, at some point, to sell Barnes & Noble for a lot more than they bought it for—they expect to make tons and tons of money. But they also know that they will only do that if we can make the business shinier, bigger, and better." That explains why a hedge fund bought the bookseller, and I think its very promising talk.

I didn't know that Waterstones acquired Foyles, the great London bookstore that was previously the world's largest. All of my trips to London included a visit to Foyles on Charing Cross Road, and my suitcase was a good deal heavier on the way home.

Daunt Relishes Challenge of Leading B&N
By Ed Nawotka
Jun 09, 2019
In 1991, one year after James Daunt opened his first eponymous bookstore in London, Waterstones unveiled its first U.S. bookstore in Boston. The U.K. chain grew its stateside presence to a modest size, maintaining a foothold in the country until the turn of the millennium. Like today, the 1990s saw many retailers forced to close, but for a different reason: they were ceding ground to chains, big box stores, and superstores. Among the chains expanding rapidly at the time was the bookseller Barnes & Noble, which had acquired several other bookstore chains and was subsequently blamed, together with the rise of Amazon, for the demise of thousands of independent bookstores.

Fast forward to the present, when Amazon is the unchallenged superpower in online retailing, indie bookselling is having a resurgence, and the much-beleaguered B&N has just been sold to Elliott Advisors for $683 million. And Daunt is now the man charged with running B&N and reviving its fortunes.
It will be one of many bookselling challenges taken up by Daunt, who, in addition to running his own chain that currently boasts nine stores, has been leading Waterstones for the last several years, having brought it from a state of near bankruptcy to profitability and a subsequent sale to Elliott Advisors last year. Aside from Jeff Bezos, Daunt is now the most influential man in English-language bookselling, running 293 Waterstones bookshops spread across the U.K., Ireland, the Netherlands, and Belgium and, when the B&N deal is completed later this year, 637 Barnes & Noble stores in the U.S.

Daunt appears ready for the responsibility. In an interview with PW, he said that when he assumed the role of managing director at Waterstones in 2011, the situation there was much worse than at present at Barnes & Noble. “At the very least, B&N is profitable,” he said, “but I may be stating the bleeding obvious that if sales aren’t turned around, there are going to be some adverse consequences—closing a lot of shops or, worse, closing all the shops.”

When Daunt first took control of Waterstones at the behest of then-owner Russian billionaire Alexander Mamut, the U.K. chain was losing tens of millions of dollars a year. It was a rocky start. Daunt led the company in cutting costs, which resulted in thousands of employees being laid off, including approximately half the managers and a third of the booksellers, according to the Guardian. He also engaged in several controversial experiments, including offering Amazon Kindle e-readers for sale in Waterstones stores, a practice that lasted for three years, and the opening of individually-branded, smaller format stores that lacked Waterstones brand. And yet, Waterstones began showing a profit again in 2015, and has continued to show modest gains ever since.

Considering the situation at B&N, Daunt said his priority with B&N is not to cut costs but to find a way to arrest the decline in sales and return the company to growth, much as he did at Waterstones. The key, he said, will be investment.

“Elliott expects, at some point, to sell Barnes & Noble for a lot more than they bought it for—they expect to make tons and tons of money,” Daunt said. “But they also know that they will only do that if we can make the business shinier, bigger, and better. To do that, they will need to share some of their treasure with us. The simple fact is that B&N needs money: people want to shop in places that look modern, clean, and inviting. The B&N stores look tired and need a little botox.”

Daunt admitted that the task of turning around B&N may entail a steep learning curve, as the United States is a far larger and more diverse nation than the U.K. “You have to work out what you want to do in each location,” he says. “A customer walking into the Union Square flagship store, a store in Boston, or one in Jacksonville, may all want different things—and I’ll be honest here, I haven’t a clue what the customer in Jacksonville is like. Not yet, at least.”

Unlike B&N's previous leaders, who doubled down on Barnes & Noble's e-reader initiative despite losing more than a billion dollars on the program, Daunt is agnostic about whether or not the company will continue investing in e-book sales and the Nook. Back in 2011, it was widely believed Waterstones would team with B&N to sell the Nook; it didn’t, and went with Amazon instead, which resulted in poor PR and poor sales. Today, Daunt still believes in the viability of e-books, which he told PW remains "a sensible option for readers." He calls the chance to have another crack at selling e-books successfully an "exciting" opportunity.

"Nook just introduced a new model, so let’s see how it does,” he said, adding, “I don’t want to be selling someone else’s [e-reader], but I have no problem selling my own.”

Daunt expressed just as much enthusiasm for taking over BN.com. “When it comes to e-commerce, we learned from Waterstones that you need to do it intelligently, which is easier said than done,” he said. “The fact is, you aren’t going to out-Amazon Amazon, so instead you need to work with your strengths.”

He also sees the synergy between B&N stores and BN.com and the integration of online and in-store experiences—something that Foyles bookshops, the venerable U.K. chain acquired by Waterstones last year, was at the vanguard of developing—as an area for potential growth. "We have had a lot of success with the promotion of “click-and-collect” purchases, where customers order online and then pick up their orders at the store," Daunt said. "We are enjoying top line sales growth of 30% with this at Waterstones”

As for best practices that he can transfer to the U.S., Daunt said that the focus must be on the bookseller’s ability to cater to each customer base. For example, all discounting on titles is set by individual Waterstones stores. “Some in the countryside have more discount promotions, some stores on the London high street have none,” said Daunt. “The idea for us, as management, is to get out of the booksellers’ way and let them do their job.”

The answers for B&N’s troubles reside, Daunt claimed, within B&N. “There is a good group there who have thought long and hard about how to improve their business,” he said. “The people who are going to do the work are already there, and we just have to get the best out of them. I am a real bookseller and understand how stores work. I have done it before—the scale is a lot bigger, but so are the resources available.”

Above all, Daunt expressed calm about the transition, and advocated for patience. “There are some people who come in with a 100-day plan, but I am not like that and this is not that kind of situation.” He said that anyone who thinks there is a “magic bullet” to solve B&N’s problems is crazy. “I am not marching into B&N and saying 'here is the answer.' We are in a vocational trade and we make money by doing booksellery things. So that is what we will do. Nothing will change quickly. There may be the odd tough decision to make—hopefully not too many. I am looking forward to the challenge.”

https://www.publishersweekly.com/pw/by- ... g-b-n.html

[Lance]

I know the Chinese were interested in buying out Steinway & Sons. I haven't heard too much about that lately. America is losing its iconic companies one-by-one. I just read, too, where our local mall, who lost Macy's, Sears, Bon-Ton and a bunch of other stores, has defaulted on payments since March. Brick and mortar stores - especially malls - are fast fading. Our Barnes & Noble is still operating here - the café does very well - but I don't think books are selling as they should or like they used to before Amazon came along.

[John F]

The latest I've found about Steinway is from last August and you've probably seen it, but here it is:

https://www.bloomberg.com/news/articles ... r-steinway

Steinway & Sons sold out to the hedge fund Paulson & Co. a decade ago. Paulson bought it in order to sell it, that's what hedge funds do. Obviously they aren't managing the company's operations, and it doesn't appear that the potential Chinese buyer has any previous experience in building pianos, so I expect the current workers and managers are likely to remain in place, with possibly more added to supply the growing Chinese market. How this will affect the quailty of the new pianos or the maintenance of the old ones remains to be seen, but if these haven't gone downhill since Steinway was sold in 2008, maybe it will be OK.

[John F]

About Barnes & Noble's new boss, James Daunt:

When Mr. Daunt took over Waterstones, he did away with so-called mystery shoppers, a common retail tactic in which undercover buyers report on a variety of performance metrics at stores, like speed of service and tidiness. Mr. Daunt considered this patronizing and bound to engender ill will between management and staff. He needed employees who relished their work, preferably book lovers who evangelized about their favorite reads.

He needed people like Kurde Atfield. She has been managing the Waterstones in Horsham, a town about 40 miles outside London, since 1999. She grew up in Iraq, where she struggled through Dickens and Proust in an effort to impress her father. Shelves in the store were strewn with her handwritten raves on small pieces of paper. “Oh how I envy you if you are reading this wondrous book for the first time,” said a note under E.M. Forster’s 1908 novel, “A Room With a View.”

Waterstones’ previous owner, HMV, best known as a music retailer, would never countenance this quirky brand of enthusiasm. For years, Ms. Atfield would receive weekly planograms from company headquarters, a visual layout that determined nearly every square foot of the store — which books were placed on tables, where those tables stood and so on. The planogram was enforced by occasional visits from HMV managers. Deviations were noted, and scoldings were delivered in follow-up emails.

As HMV foundered, the company was in too much disarray for spot checks. So Ms. Atfield, for the first time, configured the store exactly as she wanted. She ditched the pink cardboard lining that was supposed to cover the shelves of promoted books. She and her staff didn’t wear the black polo shirt with the Waterstones insignia. And she stocked the most prominent shelves with the titles that were selling well in Horsham, rather than the ones mandated by HMV. Like “Bloody Southerners,” a book about a soccer team in the south of England, written by Spencer Vignes. The 2018 release is precisely the kind of area favorite that she once was forbidden to feature. “In the HMV days,” she said, pointing to a table with nothing on it except copies of that book, “there’s no way I could have gotten away with that.”

Soon after she had laid out the store to her tastes, Mr. Daunt came to visit. It was not long after he had been put in charge of Waterstones, and the scuttlebutt was that he would give store managers unprecedented freedom. Yeah, right, Ms. Atfield thought. Mr. Daunt toured the store by himself, quietly scribbling notes. Then he left. For days Ms. Atfield braced herself for a reprimand and a long list of corrections. It never came.

“From that day on, I’ve never once been asked, ‘Why are you buying this book?’ ‘Why are you recommending that book?’” she said. “I’ve literally been left to turn this shop into a place I think will be fantastic for our customers in Horsham. The difference is almost incalculable. I love coming to work.”

Others are less enthusiastic. That’s especially true among the ranks of newcomers. In April, a petition signed by more than 600 employees was delivered to Mr. Daunt at his office, above the Piccadilly Circus store, imploring the company to pay a starting wage equal to $13.19 in Greater London and $11.25 elsewhere — about 10 percent above its current rate. Roughly 2,400 authors signed a separate petition of support. They included Sally Rooney, whose novel “Normal People” was named a Waterstones book of the month. “People feel undervalued,” said April Newton, who spearheaded the petition and has since quit her Waterstones job. “A lot of people I know are leaving.”

In the interview, Mr. Daunt agreed that the starting pay at Waterstones was “rubbish.” But he said the demanded raises would cost the equivalent of $6.2 million that the company could not yet afford. The current pay structure, he went on, gives decent increases to employees once they have committed to a career with Waterstones, which typically takes years. The point is to provide an incentive to stick around, even if that means stinting on those who will not.

That said, Mr. Daunt completely sympathized with the complaints. Enough so that in late July, he announced a surprise 4 percent bonus to everyone in the company. He said that sales were strong and that “shops were simply a little bit better than a year earlier.” Organizers of the employee petition called the bonus both a victory and a token gesture, one that leaves many Waterstones booksellers unable to afford food and rent.

Once Mr. Daunt commences his overhaul of Barnes & Noble, he will again try to turn a large chain into what looks and feels like a collection of independent bookstores. Again, he will do battle with a culture of stifling uniformity. “Each store was told: ‘This is your display. This book should be in this exact spot,’” recalled Steve Galindo, an Oklahoma resident who worked at three Barnes & Noble stores over 17 years before being laid off in February. “Individuality was often something you got in trouble for.”
Barnes & Noble’s staff needs to feel a sense of agency, Mr. Daunt said. And from past experience, he has a surprisingly simple test to determine when that has occurred: Employees start to answer the phone.

“If I can get the phones to stop ringing and ringing at Barnes & Noble, it will be a miracle, a stunning miracle of life,” he said with a laugh. “If I pull that off, everything else will be working. It means employees have a sense of absolute mastery over everything they do.” At Waterstones, phone-answering mastery can be found at just 120 stores, Mr. Daunt said, which are fewer than half. And that is nine years after he took over. “I can guarantee that if you call the Piccadilly store,” he said, “no one will pick up the phone.” He was right. Five calls were made to the store the next day. Five times, no one answered.

https://www.nytimes.com/2019/08/08/book ... daunt.html