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Barnes & Noble to shutter 200+ stores over 10 years

The mega bookstore looking to cut costs after low holiday sales

Financial trends and news by Faith Merino
January 28, 2013 | Comments
Short URL: http://vator.tv/n/2d2d

Less than 18 months after former mega bookstore Borders Group shuttered its 399 retail locations, Barnes & Noble is gearing up for a massive shutdown of its own. The company told the Wall Street Journal that it plans to shutter as many as 239 of its 689 stores over the next 10 years.

Barnes & Noble shares have fallen 13% over the last month since the company revealed that its holiday sales didn’t meet expectations. Over the course of the nine-week period ending December 29, B&N’s retail segment pulled in revenues of $1.2 billion, which is a decrease of nearly 11% over the previous holiday season. Interestingly enough, Nook sales were also down.

Barnes & Noble’s chief executive of retail, Mitchell Klipper, told the Wall Street Journal that the company will shut down some 20 stores a year over the next 10 years. In the same breath, he tells WSJ that even with 450-500 stores, “it’s a good business model. You have to adjust your overhead, and get smart with smart systems. Is it what it used to be when you were opening 80 stores a year and dropping stores everywhere? Probably not. It's different. But every business evolves."

Barnes & Noble has been waging a valiant struggle against Amazon and its well-planned digital strategy, combined with its rock-bottom prices. But is it enough? The e-book market is heating up. Notably, last year, e-book sales eclipsed hardback sales for the first time ever, with e-book sales reaching $282.3 million, compared to hardback sales of $229.6 million.

Rising e-book sales have largely correlated with ramping e-reader and tablet sales. Currently, one in three adult Americans owns either a tablet or an e-reader.

Barnes & Noble did what Borders didn’t—it developed a digital strategy when it became clear that e-books were here to stay. But it’s in a physical/virtual retail limbo, having made a name for itself as a megastore for books, whereas now it’s having to navigate a gradual transition to digital.

Klipper tells the WSJ that fewer than 20 of the company’s 689 retail stores are losing money, so the move isn’t about making a full transition to a digital-only presence. But will it have the funds to support its physical locations while also competing in the digital domain? You could argue that Amazon definitely has the funds to do that (it saw sales of $13.81 billion compared to B&N’s $1.2 billion for the quarter ending in October 2012)—but why doesn’t Amazon have any physical retail locations? Because there’s no point.

If most of Barnes & Noble’s store locations aren’t losing money yet, they will be soon. It seems like they’d be wiser to shut down a lot more of their stores and focus more of their resources on competing with Amazon in the digital space.

 

Image source: NYCMagazine.com


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