In a memo sent to employees at the end of October, Barnes & Noble chairman Len Riggio said with the retail environment the worst he has ever seen as a bookseller, the nation’s largest bookstore chain is “bracing for a terrible holiday, and expect[s] the trend to continue well into 2009, and perhaps beyond.” Riggio added, “Never in all of the years I’ve been in business have I seen a worse outlook for the economy. And never in all my years as a bookseller have I seen a retail climate as poor as the one we are in. Nothing even close.” The release of the memo was first reported on November 3 by the Wall Street Journal.
Riggio assures that the company’s financial foundation is solid: “We still intend to pay out a $50 million dividend to our shareholders this year. In addition, we have a solid balance sheet, excellent standing with the banking community, and more importantly, a large line of unused credit to draw upon. And, even with this year’s large sales shortfall, we will make a decent profit, and end the year without owing a penny to our banks.”
Riggio’s remarks follow statements made by B&N CFO Joe Lombardi in early September at an investor’s conference, where he said the retail environment was the worst the company had seen in 30 years. The company’s same store sales were down in the first part of the year.
And on November 20, Barnes & Noble reported sales of $1.1 billion for their third quarter, and a net loss of $18.4 million. Same-store BN store sales of $971 million were down a big 7.4 percent (and fell 4.4 percent overall), while sales at the online unit rose 2 percent, to $109 million. The loss includes a special after-tax impairment charge of $7 million “to reduce the asset carrying value of certain store locations.”
Having cut planned new stores for 2009 early from 30 to 35 to a target of 20 to 25 stores, they are “now reducing that number to approximately 15 new stores,” of which nine are relocations and upgrades.
Riggio said they were experiencing the “same type of decline reported by other major retailers” and cited in particular the “lack of coverage of books, both in the mainstream media and on talk-radio,” due to the presidential election and the economic crisis. Riggio told analysts not to expect extra discounts this holiday to drive sales. “We don’t believe that more aggressive discounting is profitable. We can drive traffic, but we don’t think we can drive traffic profitably” that way.