Last week the Hastings, a chain of 126 retail stores, declared bankruptcy. Approximately half of their sales are from books (the other half are movies, music, games, etc). They claim “a decline in the market for physical media properties like music, movies, books, games and media rentals.”
They had losses of $16 million on sales of $400 million. Among their largest unsecured creditors include publishers and distributors such as HarperCollins ($1.06 million), Simon & Schuster ($726,000), Macmillan ($453,000), Perseus Distribution, recently purchased by Hachette ($428,000), Ingram Distributors ($372,000), and Scholastic ($321,000).
However…
In other news, sales at Canada’s dominant bookstore chain, Indigo, were up 15% versus the previous year’s same quarter. And Amazon announced the opening of their third brick-and-mortar store in Portland. In addition, Barnes and Noble announced they will close fewer stores than previously announced. Partly because same store sales have stabilized and net income for the last quarter was up 15%.
What is the Real Story?
As with all retail there is a constant ebb and flow, especially in this day of online disruption of traditional shopping patterns. Even the venerable Sears is contemplating selling iconic brands to generate capital.
But when a large chain announces bad news like Family Christian (in 2015) or Hastings (see above) or Borders (liquidated in 2011) you have to look into the store’s financials to find the story. A common theme of the three mentioned here is that they all were carrying too much debt. For Family and Hastings it was due to a recently purchase by another company and sales did not grow as anticipated. For Borders it was a mix of many reasons (see this link for a list) but they too were leveraged due to rapid expansion (and signing high priced leases) right when both Internet sales changed the game and the economic climate soured. Bad debt or too much debt has a price…like having a mortgage you cannot afford. At some point something has to give if sales cannot increase to cover the expenses.
What Does this Mean for the Rest of Us?
Remember the adage “if it bleeds it leads” which means bad news makes headlines. Be careful not to quickly join the Chicken Little Chorus of “The Sky is Falling.” Of course retail is challenging. It always has been.
For example, in 1973 MetroCenter Mall opened in Phoenix and was one of the largest indoor malls in America at the time. It had five anchor department stores (the typical mall had two). Those five stores were: Goldwater’s, Rhodes, The Broadway, Sears, and Diamond’s. Only one of those is still operating today under the same name. The lesson is that retail is constantly changing based on shopping habits.
Therefore, I tend to tilt my head a little when hearing of another bookstore or book chain in trouble. But I refrain from panicking. Books are still selling and people are still reading, a lot. They are simply being purchased in new places or in places that are still solid.
I visited a Hastings store near where I lived. It seemed a bit of everything from toys, gifts, candy and books were more of a sideline. I haven’t been back since.
However, I do go to B&N on a regular basis. They also sell those items, but in smaller areas.
Thanks for giving us the other side of the story, Steve!
Thanks, Steve! Ironically, I read this while watching a bio of Andrew Carnegie, who built the first steel bridge, and did it big–across the Missussippi at Saint Louis. People were so skeptical, he walked an elephant across it first, to prove its safety! Your post and that bio–two reminders that the ways of delivering products always change but seeing potential markets and using innovative strategies to reach them will still get the products to those who want them. When our “product” is a message for the heart instead of something tangible, we would like to avoid the realities of market economics, but they are real and we ignore them at great risk. Thanks for the reality check!
I appreciate that you brought the other factors into the mix, such as too much debt. It helps to keep things in perspective.
You’re a very level-headed boy, Steve Laube. 🙂
News of book store failures is always disturbing to writers, but I appreciate your careful analysis, Steve. The facts behind the headlines.
Thanks for the insight, Steve. There are bookstores I love and there are bookstores i avoid. Those I love carry the authors I love to read. Those I don’t love skimp on the books I love and display a lot of stuff I never buy. When my mother was alive and Jerry Jenkins’ Left Behind series was all the rage, in early November I ordered the entire series on CDs as her Christmas gift. I finally got all the discs in February after many mistakes –two of the same, missing CD’s, and more. Needless to say, I never returned to that Christian bookstore. I buy a lot of books, but not there.
This is good to hear Steve. Don’t fear – just push on and work hard! Yes, the market always changes and this post helps to negate the fear or worry about the future of book sales!