Shop Talk
Retailers, consumers and prices
Check Out Line: Showdown at the Barnes & Noble corral
Check out Barnes & Noble’s victory at its annual meeting.
Shareholders of the U.S. bookseller had to choose between dissident investor Ron Burkle and Chairman Len Riggio as a bitter proxy battle between the chain’s top two stakeholders came to a head.
And the winner of the “gunfight” was Barnes & Noble, whose slate of directors won election.
Burkle, whose Yucaipa Cos owns 18.8 percent of Barnes & Noble shares, had been on a slate of three nominees seeking seats on the board, including the one held by Riggio, the man who built the chain into the largest U.S. specialty bookseller and the company’s largest shareholder with a 28.2 percent stake. Three of the nine board seats were up for a vote.
Burkle also asked shareholders to modify an anti-takeover “poison pill” that Barnes & Noble put into place last year after Burkle doubled his stake. Burkle had accused Riggio of running the company for his personal benefit and leaving it saddled with debt and ill-prepared for the shift to electronic books.
Barnes & Noble, which put itself up for sale in August, had said Burkle is seeking control of the company without paying shareholders a premium and lacks a business plan of his own. Riggio has said he may make a bid to buy the company. After the shareholder vote, Burkle’s Yucaipa called on Riggio to support the highest bid in such a move.
Burkle received a boost last week when influential shareholder advisory firm Institutional Shareholder Services Inc backed Burkle’s slate of directors, but three other leading firms had sided with Barnes & Noble.
Check Out Line: Borders launches e-bookstore … finally
Check out Borders Group finally launching its e-bookstore.
The No. 2 U.S. bookstore chain’s electronic bookstore comes nine months after rival Barnes & Noble debuted its Nook e-reader and three months after Apple introduced its popular iPad tablet computer, allowing both companies, and Amazon.com, which sells the Kindle e-reader, to get a head start.
No worries, says Borders, which saw sales at its namesake superstores open at least a year and on its website fall 11.4 percent in the first quarter.
“We’ll take market share just by turning it on,” said Mike Edwards, president of Borders Inc, the company’s main operating business.
Edwards said Borders had data and email addresses for the 38 million customers in its loyalty program and about 700 stores at which to promote its virtual bookstore, which will help it catch up. The company’s goal is to secure a 17 percent share of the e-book market by July 2011.
“A lot of people have said, ‘You’re kind of late to the game,’ and I’m saying, ‘the game actually just started,’” Edwards said.
However, larger rival Barnes & Noble recently said it has already won 20 percent of the U.S. e-books market since launching Nook, exceeding its share of the physical book market.
Check Out Line: Ron Burkle invests in yet another challenged company
Check out Ron Burkle’s continued affinity for companies in trouble.
The supermarket magnate has taken a 6 percent stake in American Apparel, according to a regulatory filing on Thursday. That’s the billionaire’s latest investment in iconic companies that just can’t seem to get back on track.
The apparel maker and retailer, founded and run by the colorful, often scandalous Dov Charney, came close to tripping a loan covenant with its creditors but reached a deal yesterday, averting disaster.
Burkle has also upped his stake in Barnes & Noble, whose sales are still trending downward despite the popularity of its Nook e-reader, in recent months and is battling with the Riggio family for control of the bookseller. He owns nearly 20 percent of Barnes & Noble and fought, unsuccessfully so far, to double his take without triggering a poison pill. Tuesday’s annual shareholder meeting promises to be colorful.
But Burkle has also been reported in the past to be interested in stakes in big names such as the New York Times and upscale retailer Barneys. Maybe he sees these brand-name companies as able to turn things around under the right influence: his.
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Check Out Line: The latest bookseller boss shakeup
Check out the new guy in charge at Barnes & Noble.
On Thursday, Barnes & Noble named William Lynch, the (young) father of its Nook e-reader, as its new chief executive. Outgoing CEO Stephen Riggio — the chairman and founder’s brother — is sticking around as a vice chairman.
Barnes & Noble appears to be betting that the Nook will be a prime source of future growth. Lynch, 39, called e-books “key to our future” during a morning conference call.
Lynch’s appointment comes less than two months after smaller rival Borders saw its CEO leave after a year.
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Check Out Line: Power plays in the air
Check out the power plays going on in the consumer world.
Walgreen said it will buy Duane Reed for $618 million in cash, catapulting the largest U.S. drugstore operator into the top spot in the New York City area. The deal price also includes the assumption of $457 million in debt.
Duane Reed is owned by private equity firm Oak Hill Capital Partners and operates 257 drugstores in the New York metropolitan area. Duane Reade will continue to operate under its brand name, and Walgreen expects to retain the employees at its stores, pharmacies and distribution centers.
Walgreen operates 70 stores in the New York area, including a multi-floor outlet in the heart of Times Square across the street from a Duane Reade store.
Meanwhile, Barnes & Noble told Ronald Burkle to take a long walk off a short pier, saying it would not waive its “poison-pill” anti-takeover provision to allow the billionaire investor to nearly double his stake in the top brick-and-mortar U.S. bookstore chain.
Talbots, a retailer that caters to mature women, said it amended its merger agreement with BPW Acquisition Corp, a special purpose acquisition company, so as to give greater assurance to BPW shareholders regarding the value of their merger.
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Check Out Line: Borders had a lousy Christmas
Check out Borders’ poor 2009 holiday sales numbers.
The No 2 U.S. bricks-and-mortar bookseller disclosed its how sharply sales fell during the disastrous 2009 holiday season on Monday (apparently hoping no one would notice on the Martin Luther King Jr holiday, with the markets closed). It is hardly the kind of news Borders needs after it has been lambasted by investors and analysts alike for coming so very late to the e-books reader game.
Borders said comparable sales at its superstores fell 14.6 percent in the 11-week period ended Jan. 16. (To be fair, excluding weak sales in items such as music and video, which Borders is moving away from, sales were down 10.9 percent.) How did it stack up against its biggest rival? Barnes & Noble’s same-store sales fell 5.4 percent in the nine weeks ended on Jan 2.
Borders CEO Ron Marshall said he was “disappointed” with the results. Maybe he should also be worried. A year earlier, a decent holiday season allowed the company to have its only profitable quarter in fiscal 2009. (For now, though, analysts seem to think Borders made money during the holidays despite dwindling sales, according to Thomson Reuters I/B/E/S.)
Still, investors see some cause for concern. Borders shares fell 14 percent to $1.17 in premarket trading on Monday.
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Kraft snares Cadbury for $19.6 billion
Check Out Line: No nook for you
Check out another nook delay.
Some of Barnes & Noble’s top stores were supposed to have nook e-readers available for sale today. Instead, shoppers can just look at the nook, not take it home.
In-store demo models have been delivered and Barnes & Noble is accepting pre-orders, spokeswoman Mary Ellen Keating said.
That’s a slight change from what she said last week: “We expect to have them in our highest-volume stores on December 7th and in a very limited number.”
Barnes & Noble had earlier hoped to have a limited number of its e-readers in some of its stores around Nov. 30.
While shoppers may struggle to get nooks — and who knows, maybe buy Kindles instead? – at least one select group of consumers got their hands on the gadget last week. The studio audience at The Ellen DeGeneres Show got nooks, among other tech goodies, during the first day of “Ellen’s 12 Days of Giveaways,” which aired last Thursday.
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Check Out Line: When cost cuts aren’t enough
Check out the cost cutting formula failing at Sears.
In the past few weeks a slew of retailers, ranging from Target to Macy’s to Dillard’s, have posted results that were better than Wall Street expected, helped by cost cuts. Retailers have done everything from freezing executive salaries to eliminating jobs to slowing store expansion plans.
But on Thursday, Sears reported a surprise loss in its second quarter while analysts were expecting a profit.
The company, controlled by hedge fund manager Edward Lampert, cut total costs and expenses 8 percent. But revenue fell 10.3 percent to $10.55 billion.
Sales at its Sears stores continued to suffer from the faltering housing market, which has sapped demand for its Craftsman tools and Kenmore appliances.
Same-store sales at Sears fell 12.5 percent, while Kmart’s same-store sales slid 3.9 percent. Overall, same-store sales fell 8.6 percent, and the decline accelerated after slowing during the past two quarters.
“Ouch,” wrote Morgan Stanley analyst Gregory Melich in his note reviewing the results. “This morning’s 2Q miss was pretty much across the board, with weak comps and lack of gross margin expansion standing out.”
Check Out Line: Buying basics buoys big chains
Check out the ten largest U.S. retailers.
The National Retail Federation’s STORES magazine is out with its annual ranking of the top 100 retailers.
The list shows that U.S. consumers have been focused on bargains and basic necessities, such as food and medicine. Wal-Mart tops the lineup, followed by Kroger and Costco. Home Depot fell from No. 2 in 2007 to the fourth spot in 2008 as many shoppers decided to cut back on costly home-improvement projects.
Home Depot, Lowe’s and Sears Holdings were the only members of the top 10 to see their revenue fall in 2008.
Some other rankings that may interest you: Amazon.com is the 19th largest retailer, ranking higher than well-known chains such as J.C. Penney, 7-Eleven and Gap. Apple’s stores and iTunes combined hold the 40th spot, topping chains such as Nordstrom, Whole Foods and Barnes & Noble.
The companies were listed by annual revenue, which may include estimates for private or closely-held companies. Revenue from major non-retail operations were excluded when possible.
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This is a worldwide trend, bargain and dollar stores are flourishing and businesses selling products with higher profit margins see their revenue fall sharply. Could it be that we’re in a recession?
Check Out Line: A tale of two retailers
Check out Americans buying fewer books and searching for cheap chic.
Barnes & Noble said quarterly sales at its stores fell 4.8 percent and comparable sales on its web site fell 10.4 percent in the latest quarter. Over at Ross Stores, sales rose 5 percent, as consumers scooped up bargain fashions.
Barnes & Noble CEO Steve Riggio called 2008 “the most challenging year that the company and the industry have ever experienced” and added the company would continue to hold down expenses to cope.
Sales at the company’s namesake stores open at least a year fell 7.3 percent and things don’t seem to be picking up soon. Barnes & Noble expects those sales to fall 6 percent to 9 percent this quarter.
On the other hand, here’s what Ross CEO Michael Balmuth had to say: “We are very pleased with our solid earnings per share growth for both the fourth quarter and fiscal 2008. Our results are especially noteworthy considering the extremely challenging macro-economic and retail environment that became increasingly difficult as the year progressed.”
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