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Barnes and Noble’s NOOK falls short on sales

It’s looking like a rough year for the bookstore giant Barnes and Noble. Unable to move with the times, their promising E-Reader fails to meet the anticipated sales of the company. According to their recent fiscal-year earnings report, the NOOK dropped 23.4% in sales compared to 2016. This report comes after a series of changes in the executive department of the company, seeing three different CEO’s come and go in only four years.

What’s Wrong With the NOOK?

The reasons behind the NOOK’s poor sales are way beyond the hands of their top managers. For instance, the Amazon Kindle (their primary competitor) continues to be the leading E-Reader in the market. This is due in part to the different options Amazon gives their customers, giving their customers over four different Kindle options to choose from.

Additionally, most e-books are easy to download onto a smartphone or tablet. Hence, this reduces the demand for E-readers with limited capabilities. Perhaps we will see the NOOK redesigned in the upcoming months to match the likes of the Kindle, or unfortunately see it discontinued and forgotten.

About That B&N Edu Stock…

I’ve talked about the volatility and drop of B&N and B&N Edu stocks. Now it seems like things are about to get even more interesting for stock-holders (not to mention accountants and lawyers).

Today’s News Regarding NYSE:BNED Stock:

  • Srijayanth “Jay” Chakrapani, Vice President & Chief Digital Officer at Barnes & Noble Education, sold 6,500 shares on Friday, March 17. Details are here and that article includes a link to the SEC filing.

Insider trading is a tricky thing for obvious reasons. Sometimes a sale is just a sale; other times a sale is a dump by someone who knows something indicating a downward turn. What this is (and keep in mind that Chakrapani still owns more than 60,000 shares) remains to be seen, but a B&N Edu exec selling one-tenth of his shares on a Friday afternoon when the stock has seen better days is worth a Guru mention.

The Textbook Guru Roundup: March 3, 2017 Edition

Seriously busy week and one that’s been heavy on textbook-related news. Here’s what’s on my mind as I head into the weekend.

Lesser News But Still Worthy of Our Attention:

A Very Big Deal: B&N Acquires MBS

Barnes & Noble Education Acquires MBS Textbook Exchange: The Guru’s First Thoughts and a Little Background on the Deal

In less than a month of being the new Guru, I’ve already talked industry consolidation (Follett acquires Baker & Taylor) and touched upon Barnes & Noble Education’s stock woes. In today’s post about the B&N Edu $174.2 million acquisition of MBS Textbook Exchange, I combine the two.

A Bit of Background About the Deal

  1. B&N Edu and MBS have a long-standing sister-company relationship. B&N runs college bookstores and MBS does textbook fulfillment (B&N gets preferred used-book inventory). This relationship comes down to Len Riggio, who, even though now retired from B&N, holds a lot of B&N stock and is Chairman of the MBS Board and holder of 49% of MBS stock.
  2. B&N Edu is a leading campus bookstores retailer with a large physical and online presence. MBS is a leading textbook wholesaler, college-bookstore systems provider, and provider of 700+ direct school-associated online fulfillment for both colleges and K-12 institutions.

What we have in this acquisition is really just two connected, complementary companies becoming one. But what’s it all about?

In a nutshell, it’s about classic textbook vertical integration where the same company controls both the retail and wholesale market in order to drive efficiencies and reduce costs and redundancies, while also shortening the supply-to-sales chain, and empowering bookstores with tighter inventory control and pricing.

B&N has historically relied upon acquisition-and-consolidation has historically as its driving growth strategy. Since purchasing the company in 1971, B&N as guided by Riggio, has acquired bookstore chains, including:

  • Bookmasters
  • Supermart Books, which operated The Missouri Book Company (All retail stores sold to Barnes & Noble College Stores. Name changed to MBS Textbook Exchange, Inc. and company focused on textbook supply, store systems, and direct fulfillment.)
  • B. Dalton Bookseller
  • Doubleday Book Shops

B&N’s super-size retail presence was massive, and in addition to putting numerous independent bookstore out of business, it also took a toll on larger competitors:

  • Superstores: Borders — filed for Chapter 11 in 2011.
  • Mall stores: Waldenbooks — (owned by Borders) also defunct in 2011.
  • College bookstores: Follett and Nebraska — the former acquiring the latter in 2015 and then wholesaler Baker & Taylor in 2016.

The Missing Link Is Put Fully Into Place

B&N has had (and continues to have) a strong grip on retail bookselling. What they did not have prior to the acquisition of MBS was a wholesale book distribution operation. This absence, however, was not for lack of trying. In 1999, Barnes & Noble (the nation’s largest bookseller) announced its plans to buy Ingram Book Group (the nation’s largest book wholesaler). Within six months, B&N called off the $600-million deal as a result of the FTC stating intent to oppose the deal on grounds that it was “anti-competitive.”

And now B&N has finally filled that void. That B&N Edu acquired MBS Textbook Exchange less than one year after Follett acquired Baker & Taylor could not be less surprising or more timely. It is both a reaction to Follett taking ownership and control over the second-largest book supplier and an action that has been expected for decades and likely would have transpired regardless of Follett’s acquisition. Now that it’s happened, expect B&N stock to get a much-needed bump and for the B&N Edu vs. Follett fight for college bookstores to intensify.

Making Learning Materials Affordable in the Golden State

An Introduction to Our Two-Part Series About How California’s Major University Systems Have Been Tackling the High Cost of Textbooks and the Larger Issue of Learning Inequality

The last several years have seen lots of discussion and debate about the need to make textbooks more affordable in order to combat the high-cost of college that all too often leaves young people saddled with lifelong debt — or worse, which prohibits them from getting the education they need in order to live up to their academic, personal, and financial potential.

In the coming weeks, we’ll present part one of two-part series where we look at California, my home state and the home to some of the largest colleges and universities and state school systems in America, to see exactly what has become of those discussions — and the subsequent efforts and results — about the cost of learning materials and the larger questions about unequal access to education.

Stay tuned, this will be a must-read series that goes well beyond California in terms of relevance.

Guru Roundup: February 24, 2017

Just a quickie to let you know what has my attention today. Feel free to let me know what you’re reading about when it comes to the world of textbooks and college bookstores.

 

Follett Names New COO

Follett Corp. Names George F. Coe (Baker & Taylor) As COO

Follett got its man as the college bookstore giant named George F. Coe (formerly of Baker & Taylor) its new COO. This is in no way unexpected as Follett continues its rapid consolidation of the college bookstore market. Take a look at what Follett has scooped up in terms of both retail and distribution in less than two years:

  • June 2015: Follett acquired Neebo, Nebraska Book Company’s retail division, adding 200+ college bookstores both on campus and off campus (not to mention Neebo.com).
  • April 2016: Follett acquired Baker and Taylor, thus taking control of the distribution side of academic bookselling.
  • February 2017: Follett names former B&T executive Coe as COO effective March 31, 2017.

Follett’s strategy of vertical integration makes sense in light of the necessity of competing against Amazon. Coupling its already significant college bookstore footprint with Neebo, in addition to buttressing its logistical back-end operations with the Baker & Taylor acquisition, gives Follet a strong bricks-and-mortar competitive advantage that is difficult to replicate. It remains to be seen whether this will be enough to withstand the Amazon juggernaut.

Barnes & Noble Education and Pearson PLC Stocks Getting Crushed

The Bad News from the Textbook Market Keeps Coming

Both Barnes & Noble Education and Pearson PLC saw double-digit drops in their stock prices recently after sales failed to meet Wall Street expectations. B&N Education (NYSE: BNED) CEO Max Roberts said that the decline was related to lower enrollment at colleges and a “softer retail environment.”
Taking a hit far worse than B&N Education, Pearson PLC (NYSE: PSO) lost 29% of its value in one day in mid-January after dramatically lowering revenue-and-profit expectations for 2017. How bad has it gotten for Pearson? Well, the folks at The Motley Fool writePearson stock is now down 66% over the past three years, and the market is showing no confidence that the company will turn itself around anytime soon” and Bloomberg’s “Pearson Forecasts Years of Textbook Gloom; to Sell Penguin” is in no way reassuring.

The Elephant in the Room

B&N Education and Pearson are really proxies for the whole textbook industry. The underlying causes of the industry malaise are rooted in two powerful trends: demographics and technology. After reaching a peak of 17.3 million students in 2010, college enrollment decreased 4% between 2010 and 2014 to 16.6 million in 2014 (according to the National Center of Education Statistics). This falling college enrollment is unprecedented, and obviously fewer students equals fewer textbook sales. Technical trends, including new business models (rentals), online sales, and digital books, further undermine the old model of new textbook sales to students through brick-and mortar-campus bookstores.

While the publishers try new tactics such as access codes and custom publishing in order to revive sales of new textbooks and shrink the used-textbook marketplace, the fact of the matter is these types of tactics only serve to alienate their customer base. Students are not stupid; they realize that algebra doesn’t change that much from year to year, so why should the textbook? The publishers would be well advised to create value-added services or pass on savings for students instead of thinking up new ways to milk students for their last dollar by inflating book prices.

The textbook industry is in the midst of some serious disruption. It will be interesting to see how it all plays out.

Welcome to the New Textbook Guru! A Quick Update.

Back from hiatus and with a new look and a new Guru, the blog for all things textbooks has returned. Guru Jeff has moved on and switched industries and he’s doing great in his new endeavors. Thanks to him for his development of TheTextbookGuru.com; I’m excited to dive in and pick up the conversation.

I’m Alex Neal, the new Textbook Guru, and I’ll be your guide to and through the textbook industry. A bit about me: I’m an experienced and successful entrepreneur and the creator of CampusBooks.com. I’ve been in the online textbook business for nearly two decades and I’m an expert on textbooks, academic publishing and bookselling, e-commerce and price-comparison, digital marketing, as well as larger business development beyond the textbook industry. You can learn more about me, contact me about my areas of expertise, or pick my brain about textbooks and technology.

Going forward, I’ll be tackling all things textbooks such as eBooks and digital delivery, buying vs. renting textbooks, international editions, supplements and custom editions, mobile apps, industry players and trends, legislation regarding the high cost of textbooks, the role of the bookstore today and going forward, and so much more.

You can expect to be hearing from me very soon. In the meantime, check out the Archive and the Tag Cloud. I’ve made available all of TheTextbookGuru.com v1. If there are topics that you’d like me to revisit, drop a line. I’d love to hear from you.

Alex