Retailer Daily

Barnes & Noble Heads Back to Campus

College students aren’t the only ones heading back to campus this fall. Book retailer Barnes & Noble, Inc. will be joining them through its acquisition of privately-held Barnes & Noble College Booksellers, Inc. Through the $596 million transaction, expected to close October 1, 2009, Barnes & Noble will acquire 624 college bookstores operated through multiyear management services contracts. The stores serve an estimated 4 million college students and 250,000 faculty members at campuses across the U.S. Barnes & Noble Chairman Leonard Riggio owns Barnes & Noble College. According to Barnes & Noble, during fiscal 2009, Barnes & Noble College produced $1.8 billion in revenue and same-store sales growth of 1%. The company has also generated a compound annual growth rate (CAGR) in revenues of 6.2% during the past three years. Based on these results, Barnes & Noble estimates it would have realized incremental earnings of $115 million before EBITDA, as well as eliminated annual royalty payments for textbooks that totaled $6 million in fiscal 2008. Barnes & Noble estimates the acquisition will boost its annual earnings per share by 30-35%. Barnes & Noble is taking the gutsy step of acquiring 624 new stores during a difficult time for retail. Book retailers in particular have been hit hard, as declining book sales suggest U.S. adults are reading at lower rates than in years past. During Q1 2009, Barnes & Noble reported a decrease in total sales and same-store sales, as well as a net loss of $2.1 million. Chief rival Borders Group, Inc. reported similar quarterly results. Unlike Barnes & Noble, Borders intends to close stores this year, with plans to shutter more than 300 of its 385 Waldenbooks subsidiary locations. However, by targeting a younger audience, Barnes & Noble is following the lead of Borders, which has been actively targeting kids, tweens and teens this year. Last week, Borders announced it would expand its assortment of toys, games and related merchandise. Through August 31, Borders is running the Summer Reading Challenge for kids 12 and under. In addition, Borders is targeting young adults and science fiction fans with Babel Clash, an interactive blog moderated by its science fiction buyer. Borders also recently launched a Facebook page [reg. req'd.] dedicated to readers of young adult books and graphic novels that also features interviews, book recommendations, photos, guest postings, and other exclusive author content. By purchasing a college bookstore operator, Barnes & Noble is aiming for a slightly older audience than that which Borders is targeting with many of its promotions. However, the college student segment encompasses older teens and also adds the benefit of providing customers who are forced to purchase certain books due to class requirements. For most of this year, Barnes & Noble has focused its new business development activity on e-books and other digital offerings. However, by purchasing Barnes & Noble College, Barnes & Noble demonstrates it is not yet ready to give up on the physical world of retailing.