B&N Reports: Operating in Soft Retail Environment

B&N reported slack sales typical of many retailers this morning and even excluding the huge impact of Harry Potter in the comparable quarter numbers were down versus last year. Here is their press statement:

Sales for the second quarter decreased 1.6% to $1.2 billion largely due to last year’s record sales of J.K. Rowling’s Harry Potter and the Deathly Hallows. Barnes & Noble store sales decreased 1.6% to $1.1 billion, with comparable store sales decreasing 4.7% for the quarter. Barnes & Noble.com sales were $99.8 million for the quarter, a 3.6% comparable sales increase. Excluding prior year sales of the Harry Potter book, comparable sales decreased 1.5% in stores and increased 13.9% online. Bestselling titles during the quarter included Stephenie Meyer’s Breaking Dawn, Randy Pausch’s The Last Lecture, Lauren Weisberger’s Chasing Harry Winston and David Wroblewski’s The Story of Edgar Sawtelle. Second quarter net earnings were $15.4 million or $0.27 per share. Included in second quarter net earnings was an after tax benefit of $0.12 per share, resulting from a more favorable physical inventory shortage rate than previously estimated and accrued. Excluding this benefit, second quarter net earnings were $0.15 per share, higher than guidance of $0.08 to $0.13 per share. Despite the softer sales environment, the company’s management of operating expenses and higher than forecasted gross margins enabled it to exceed its second quarter earnings per share guidance. Gross margin was stronger than expected due to greater utilization of the company’s distribution centers and a lower markdown rate.

Other points from the conference call:

• Last year for the same period comp store increase of 4.4% and online increase of 17.9% for a total sales increase of 7.6%
• This year 1.6% decrease versus last years 7.6%.
• Excluding Harry Potter effect same store sales declined 1.5% this quarter
• Opened 10 and and closed 4 B&N stores for 723 total. Continued to close Dalton stores for a total of 73.
• Sales at B&N.com were $99.8mm for the quarter up 3.6% on top of last years 17.9% increase. The company noted that excluding HP sales at B&N.com were up 13.9% and this quarter was the 7 straight quarter of increased sales.
• Gross margins were up 150 basis points as a result of less highly discounted HP books and an significant quarterly improvement in stock shrinkage. (after tax benefit of 12cents per share)
• Guidance: The company is lowering its full year comp sales to slightly below 1%. Keeping EPS at previously issued guidance based on improved financial performance.

The company may have got off easily on the question period. No one asked about the recent resignation of Marie Toulantis (CEO of B&N.com) especially in light of the continued performance gain. Riggio commented that internet sales "were clearly a bright spot in the quarter" and traffic to the site, conversions and sales are up. In addition, the company continues to improve the site and is experimenting with web only offers. Given this performance is there a risk factor introduced with the departure of Toulantis and if she was asked to leave what do they want to do differently given this track record of continued improvement? No one asked about the competitive threat from the launch of Borders.com which based on the following chart could be a factor.



Lastly (and thankfully) no asked about their decision not to go after Borders but someone did ask about thoughts on the Kindle which they deflected.

Social Recommendations

In Business Week, author Sarah Lacy has some suggestions for publishers on how to develop, market and sell books by taking advantage of Web 2.0 opportunities. This is only one of her five suggestions:

Create stars—don't just exploit existing ones.When an author is established, publishers have to do less to make a book sell. So bidding wars start. As a result, even some best-sellers aren't very profitable. Instead, publishers should take a page from the handbook of Gawker founder Nick Denton and create stars. Find micro-celebs with a voice, talent, a niche base of readers, and most important—enthusiasm. Then leverage the publisher's brand (and the techniques I advocate, of course) to blow them out. Require as part of the contract that the author blog, speak on panels, attend events. Give them incentives for delivering—say, though Web traffic of the number of followers they amass on Twitter. Sure, publishers would have to spend more on promotion. But because they're spending less on an advance—say, $50,000 for a lesser-known writer than the hundreds of thousands of dollars (or more) they'd spend on a star—they can afford the bigger promotional budget. "It's taken some time for publishers to recognize that a successful site is as
strong a 'platform' as a magazine, newspaper, or TV gig," says Patrick Mulligan,
my editor at Gotham.

Bertelsmann Interested in Reed Business

Reuters reports that Bertelsmann's magazine unit Gruner & Jahr maybe in the mix to acquire the RBI unit from Reed Elsevier. Reuters learned of the tip via a German newspaper. In the report, Reuters also notes that indications of interest for the RBI business unit have been received and offers range between £1.0bill and £1.25bill. If correct, this range appears to match Reeds initial expectations for the deal. Reuters expects final bids to be submitted in October. Followers of Bertelsman may recall they have created a sizable fund with some PE companies with the express view to make some large (or one very large) deal. They objective was to be able to participate in the bidding process for these large media deals and not be priced out by pure PE deals. As a case in point they were very interested in the Cengage auction last year and by some accounts came quite close.

Reuters

Melbourne, City of Literature

Sydneyites (namely my cousin) used to say the only good thing to come out of Melbourne was the Hume Hwy. Unfair and untrue and in reflection of its world status, the city has been named a City of Literature (The Age).

Three days before the opening of the Melbourne Writers Festival, UNESCO has named Melbourne as its second City of Literature. Edinburgh became the first in 2004. The United Nations' cultural arm responded to an ambitious bid by the State Government that has as its centrepiece the establishment of the Centre for Books and Ideas at the State Library of Victoria. Arts Minister Lynne Kosky said the decision was confirmation of the value of a lot of people who have been working in the literature industry - writers and publishers and those who support writing and publishing.

Melbourne is a great place and this is well deserved in my view. Thanks to my Australian stringer for the tip.

Another Obama Book Controversy

No doubt Chelsea Green publishing thought they had come up with a reasonable marketing concept when they agreed to POD their upcoming Obama title (Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency) with Booksurge and offer Amazon a three week exclusive sales window. Whether this promotion had its genesis in an inefficient editorial and manufacturing process that failed to deliver what must be their single most important title in the company's history on a date that's been on the schedule for months, becomes immaterial when considered against the antipathy that has resulted. The small company has succeeded in upsetting both independents and B&N by giving Amazon this exclusive.

B&N has now cancelled their order for the non-POD version and will only sell the title on their web site via special order. Admittedly, my immediate reaction would have been much the same: Cancel the orders. On reflection however, why didn't B&N double the order and publicise that they would honor the discount coupons once the book hit the stores? Even better, offer a special discount on pre-orders. Secondly, surely the number of attendees at the convention who will actually purchase the book is small compared to the market spread of customers walking into B&N stores across the country.

The publicity surrounding this book may now have more to do with the B&N reaction (perhaps more so within the publishing community) but assuming the publicity and enthusiasm continues to grow for this book, B&N's reaction will seem increasingly ridiculous. With a little more perspective and strategic thinking B&N could have stolen a lot of the thunder from Amazon; that is, if it even existed before B&N made such a big deal about it. On a larger point, if this is how non-Amazon retailers react, how soon will it be before Amazon, encouraged by this reaction, can claim that their retailing competitors don't have the product spread they do. I don't think that is a vortex any retailer wants to be on the cusp of.

Unprecedented!

The Gossip Girl book is being packaged as part of a DVD release of the TV show. The NYTimes notes the 'unprecedented' twist on how 'publisher's hitch their wagons to Hollywood projects:

Now, however, the DVD set “Gossip Girl: The Complete First Season,” which goes on sale this week, includes a free electronic version of the original novel by Cecily von Ziegesar on which the show is based. But — OMG! — it is totally not a book that you read! It is, rather, an audio book narrated by Christina Ricci, with other bonus material like scenes that were not broadcast and “LOL: Gag Reel.” The three-hour abridgement of the novel, which Hachette Audio first released in CD format in 2003, can be transferred to an iPod. This collaboration, by Hachette Audio and Warner Home Video, which made the DVD, is an unprecedented twist on how publishers hitch their wagons to Hollywood projects. With films, publishers typically reprint a paperback with movie-poster artwork, and audio divisions similarly repackage audio books.

The article goes on to briefly discuss why audio books don't appeal to youngsters which would have been a far more interesting analysis than suggesting publisher's product development is dependent on ride-alongs with Hollywood.

First Chapters Grows in The UK

Dial a Book which owns First Chapters has announced the addition of a major UK partner in Gardners. DAB will be licencing all 210,000 first chapter files to Gardners for their use with their publishing and retail partners. From the press release:

Dial-A-Book Inc, the largest creator and distributor of book text excerpts in the United States and Gardners Books Ltd., the largest book wholesaler in the United Kingdom, have announced a joint book excerpt distribution program.

The excerpts of US books which Gardners will distribute in the UK and throughout the world contain full bibliographic data, tables of contents and five to nine pages on initial text.

"Gardners are pleased to bring this invaluable sample material, which has reviously only been available within the USA, to retailers, librarians and book buyers, through our Digital Warehouse. Giving professional book buyers in retail and libraries, and consumers buying on our customers retail websites, access to sample content prior to purchase will greatly enrich their buying decision." said Bob Jackson, Commercial Director of Gardners Books Ltd.

Stanley R. Greenfield, President of Dial-A-Book Inc. indicated that the extended distribution of this book data will means more widespread sales of US works in the global marketplace.

MediaWeek (Vol 1, No 33):

The NYTimes looks at The Daily Show's Jon Stewart. NYT. Gannett is the latest Newspaper to cut headcount. SFGate. A very interesting application of Anti-Span technology used to translate text. TimesOnline

Captchas are little boxes on web pages which show a squiggly set of letters and numbers that the user is required to transcribe correctly in order to register or enter the site. They were devised eight years ago as a way of preventing computers from setting up e-mail accounts automatically which could then be used to send out spam, but a clever tweak means they are now being used to transcribe newspapers dating from the nineteenth century and earlier. Instead of displaying a random collection of letters and numbers, the newly designed Captchas present the user with a word from an old manuscript that a computer, somewhere, is having trouble deciphering.

The Telegraph reports on a half dozen interested parties moping around the Reed Business Assets. And the Informa deal is still generating some interest and the Telegraph notes Blackstone's interest in perhaps joining an existing consortium. And more from Reuters and an earlier Telegraph report. Jemima Kiss at The Guardian reports on an interesting new application in the printing industry. "In the same way that you'd use Expedia to find flights from many airlines, you'd use our service to buy exactly the prints you need from any print provider on the network." It's never too late to write that book. From the Guardian. "A raunchy novel with a dauntless heroine has transformed the lives of a 93-year-old author and three of her friends who were living in nursing homes. Pushed by her daughter-in-law, who found the manuscript and couldn't put it down, Lorna Page has become one of the oldest debut writers on record, with equally unusual social results." We did so much for everyone but now they're all against us and we were always misunderstood. The world according to Mrs. Conrad Black. TimesOnline.

But if the rich and well-connected cannot get justice, what chance for anyone else — a question I asked in columns about the law long before I married Conrad. What chance for the orange jump-suited, marginalised young men I saw shuffling in front of the judge in Chicago, silent while their court-appointed attorneys negotiated their freedom away in that tight little legal world, where a client’s fate never disturbs the bonhomie between lawyers. If ostensibly privileged defendants like us can be baselessly smeared, wrongfully deprived, falsely accused, shamelessly persecuted, innocently convicted and grotesquely punished, it does n’t take much to figure out what happens to the vulnerable and the powerless: they land, finally, in the 8:45am courtroom parade that takes place all over “America the Free” — the country that “wins” 90% of cases and imprisons more people than any other in the world.

GB Gold Overflow

Just an unbelievable performance by the Great Britain team over the weekend. Four gold medals on both Saturday and Sunday has pushed us up to the heady heights of third on the medal table. We're running just ahead of Michael Phelps. And it's not over yet.

How good a Games has this been for Team GB? Well, a gold today will make this our most successful since 1920. The 11 collected so far matches our total in Sydney in 2000. We are well on course to make this our second best Olympics ever. BBC

Best of British: 1908 (London): 55 golds

1900 (Paris): 14 golds

1920 (Antwerp): 14 golds

2000 (Sydney): 11 golds

Random Searches

A curious search string delivered someone to my site today:

"if you have a felony conviction can you travel to the UK"

The answer to that cannot be found on this blog. Nor can I offer any guidance.

Personanondata Bookstore

People ask me whether there are any good books written on the publishing industry and of course there are. There are also many research reports that to varying degrees profile the industry and segments of the industry. With the aid of Booksinprint - I found the exercise of narrowing down my 'publishing books' selection intolerable on Amazon.com - I have built a small bookstore containing books about the publishing industry. The Amazon bookstore application building is brain numbingly easy to implement and I don't see why anyone wouldn't have a store on their own site.

You will notice I have placed the block on the upper right of my blog page. Here is the link.

The downside for me is that many of my readers are RSS subscribers so won't be seeing the Bookstore block. My attempt to add some xml script to the RSS feed has thus far been farcical but as a history major I should get points for trying. I shall not give up. As an Amazon 'associate' I get a small commission which will help pay for food for the company mascot.

Feel free to recommend some titles but please make use of the store especially if you are in need of some expensive research publications.

Is Jerome Corsi on Drugs?

Jerome Corsi says you can't trust a drug user when they say they've given up drugs. Using an argument childishly similar to 'he who smelt it delt it', Corsi and his publisher are refusing to acknowledge that Senator Barack Obama has repeatedly stated he gave up his use of drugs - other than cigarettes - long ago. Noted this drug use was never more than casual and certainly no more than the average college student is exposed to, even those from Harvard - like Jerome. Certainly, the current President has lied about a lot but has anyone suggested he has lied about giving up blow? Or Drinking? Maybe we should ask Jerome.

Jerome Corsi has no intention of correcting the errors in his book The Obama Nation: Leftist Politics and the Cult of Personality. This is despite the fact he views his effort as investigative rather than prosecutorial (why either would require a lesser degree of accuracy is beyond me). Simon & Schuster the silent publisher is only likely to be interested in the revenue which is why they signed up Mary Matalin to become a 'publisher' in the first place. Fiction or non-fiction what's the difference anymore? The book hasn't been fact corrected. It may not even have been read by Matalin who commented (NYT) that the book “was not designed to be, and does not set out to be, a political book,” calling it, rather, “a piece of scholarship, and a good one at that.” What is she doing at S&S if not political books? And given the level of scholarship and the errors cited by numerous sources perhaps this book should be excerpted in the National Enquirer.

Corsi's name is emblazoned on the cover of this book with the attendant "Phd" in a visual attempt to imply scholarship. The central points made in this book are no more accurate than those in the CIA ghost written memo noted in Suskind's book The Shadow War which came out earlier this month. Interesting that the two books are published by the same publisher. There has been no discussion about inaccuracies in the latter and indeed Suskind stands on solid ground for his diligence in reporting the facts what with all the actual interview recordings. Not so Corsi who says “The goal is to defeat Obama,” Mr. Corsi said in a telephone interview. “I don’t want Obama to be in office.” Obviously, at S&S the standards vary widely depending on the purpose. On the one hand you might have factual grounds for impeachment on the other simple political mud raking.