I saw the news a few days ago, and saw a post in book industry consultant Mike Shatzkin's blog about it:
https://www.idealog.com/blog/the-sal...as-bookstores/
That something like this might occur was
not a surprise. Folks here may remember bookstore chain Borders going belly up and winding up in Chapter 7 liquidation because various stakeholders couldn't agree on the terms of a Chapter 11 reorganization. Barnes and Noble and Borders were trying to match each other superstore for superstore in a market that arguably wasn't big enough to support
one of them, let alone
both.
The underlying problem is that books are fungible commodities. It's the same book, no matter where you buy it, so the purchase decision devolves to convenience and price.
The independent bookstore was already an endangered species. They couldn't match the pricing of the big chains. (There are a few surviving independent bookstores near me in Manhattan, but all are specialty shops carrying specific categories, and titles not likely found in a chain store.)
The big chains like B&N were under pressure from the warehouse stores. (CostCo sells an enormous number of books.)
And
everyone was under pressure from Amazon. Amazon had both superior pricing, and unparalleled convenience. See it in Amazon's catalog, buy it, and have it delivered is a few days (or download it immediately if it was an eBook.) No need to leave the comfort of your chair.
Ultimately, we are dealing with publicly held companies, and for the shareholders, it's all about the
price of the stock.
Hedge funds have bad reputations, but are not universally villains. Hedge funds want to make money. They want to make
more money than investors in them would see from ordinary funds.
Hedge funds tend to be activist investors, buying significant stock in companies they consider undervalued to get seats on the board, and pressuring management to take actions they see as boosting the value of the stock. You don't make money bankrupting companies. In some cases, the
end result of management
taking those actions is bankruptcy, but the short term response may be a jump in the price of the company's stock. An unscrupulous hedge fund might not care about that - they buy stock at a low price, do things to boost the price, then sell and take the profits. That the company fails afterward is not their concern.
Other hedge funds may see assets they think are undervalued and are turn-around candidates. The usual method for doing that is to refocus, reallocate assets, and downsize to something sustainable that can then grow from a stable base. That's what the outfit buying B&N seems to be looking at doing.
The tricky part is the downsizing. B&N knew it was too big and needed to shrink and shed outlets. The problem is that an awful lot of those outlets were in locations with
long term leases you
can't just walk away from. B&N was hoping the demise of competitor Borders and new venture like the Nook would give them breathing room, and they could simply not renew leases that expired and shrink to a more sensible footprint in a controlled manner. The question was whether they would have the time for that to happen. The answer seems to be no.
My impression is that the commercial real estate market in Britain differs somewhat from that in the US. The outfit that bought B&N seems to
be successfully downsizing it, and folks I know in the UK seem pleased with the changes taking place at Waterstone's. How well the effort will work over here is another matter, and may revolve around how fast they can close stores. That may in turn depend on how big a war chest they have, to be able to walk away from leases and just pay the damages involved in breaking the lease. I don't believe B&N could afford to do that. The new owners might be able to if they see enough upside in succeeding.
The Nook is likely to be a casualty of this, but it was questionable from the beginning. Once you've sold a B&N customer a Nook, and they have the ability to browse B&N's catalog online and download eBooks, what is their incentive to go back to the brick and mortar
store? Mostly, there isn't one, and having those brick and mortar stores where you want to boost traffic made offering a device that might reduce it a questionable move.
______
Dennis