Books A Million 1Q Profit Off 57%

From the Books A Million earnings call yesterday, (Seeking Alpha)

Net sales for the 13-week period decreased 0.7% to $115.5 million from sales of $116.3 million in the year earlier period. Comparable store sales for the quarter decreased 3.4% when compared to the 13-week period for the prior year. At quarter end we were operating 207 total stores. During the quarter we opened one new superstore and closed two Booklands. Gross margin as a percent of sales was 29.3% compared to 29.0% last year. The increase as a percent of sales was partially due to lower discounts and markdowns versus last year. Operating expenses as a percent of sales increased to 24.6% for the quarter from 23.2% in fiscal 2008. The increase as a percent of tax is primarily due to a one-time charge of $406,000 ($241,000 net of taxes) for severance related to staff reduction at the company’s headquarters. Depreciation expense increased $114,000 to $3.5 million from $3.3 million.

Shares in BAM trade around $8 close to its 12mth low and the company has a market cap of $126mm. Their 52 week high is $20.70. There are 16mm shares outstanding and in recent months insiders have purchased 2.5mm shares (16%). Primary among this group are CEO Cochran and Chairman Anderson.

Indigo (Canada) Reports

Speaking of parties potentially interested in Borders, Indigo Books and Music reported their full fiscal 2008 results after the close of the TSE yesterday. In a challenging year the company reported earnings of $52.8 million or $2.08 per diluted share on $922.9 million in revenue. This performance compares with a profit of $30 million or $1.19 per diluted share on $875 million in sales a year earlier. Company CEO Heather Reisman commented the following:

"It was a demanding year for many retailers as a result of the significant increase in the Canadian dollar. Booksellers in particular saw a meaningful decrease in book prices. Despite this downward pressure on our top line we are pleased with our
results."

At the end of 2007, Indigo operated 249 stores including 88 superstores under the banners Indigo, Chapters and the World's Biggest Bookstore, and 161 small format stores under the banners Coles, Indigo, Indigospirit, SmithBooks and The Book Company. Over the past year the company's share price has fallen from a high of $16 to its current $13. It had been below $12, but the company announced a buy-back program that may have aided its recent up tick.

From the press release:

Total revenue for the quarter increased 2.1% to $206.2 million. On a comparable store basis,Indigo and Chapters superstores posted 3.4% growth, while Coles small format stores were up 2.4%. Sales from Indigo's online channel, Chapters.indigo.ca,grew 1.0% to $24.7 million. The Company's net earnings for the fourth quarter were $3.1 million, up$7.3 million from the same quarter last year. Pre-tax earnings rose$6.1 million to $1.9 million. For the full year, total revenue increased 5.5% to $922.9 million while net earnings were up 76.0% to $52.8 million. Included in this year's results was a $8.8 million non-cash tax recovery. Pre-tax earnings rose $14.1 million to $44.1 million.

Borders Update

Borders held its annual meeting yesterday and CEO George Jones refused to be drawn on where the company was in its strategic review. Later the company released a press release saying as much (or little):

In response to recent inquiries, Borders Group, Inc. (NYSE: BGP) today reported that the company is in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date. The company does not intend to make any further comment while the process is ongoing.

There has also been an inordinate amount of interest in the reports of B&N taking a look at the Borders business. Few reports seem to offer any kind of analysis on the merits of any type of combination and even fewer seem interested in a wondering who the 40 or so other companies/entities are that have indicated some level of interest.

At the meeting, Jones was quoted as saying: "The investments that we've made during the past year ... certainly affected our financial performance in 2007... We feel that this is the year when we'll start reaping some of those benefits." (FreePress) It has always been a wonder to me that this company continues to invest in an expensive 'bet the company' revamp of its retail presence (off and on-line) while management is claiming they are cash strapped. As an investor, you would expect to reap all those benefits but not only could their timing not be worse but management don't appear to know when to both change course or ratchet back on the spending throttle.

In the UK, high street retailer WH Smiths have been linked with a bid for Paperchase. Reports suggest a value of $100mm (some say higher some say lower). The best thing that could happen for Borders is for PE to buy the whole thing. Only months ago, Paperchase was viewed as a key component of the company's future business strategy but having needlessly mortgaged the business, Jones and co have backed themselves into a corner where selling assets that should be supporting them in a downturn is considered as viable solution to their problems. Rest in peace.

Cramer Hates Media

Jim Cramer comments on the media business in the Hollywood Reporter:

"I hate media stocks."...."The world got changed by two companies," he says. "Apple is taking away the profitability of TV, and Google is taking it away in print. And it's never going to reverse." In the near term, Google is the bigger villain."It's just a parasite," he says. "It doesn't create content, it steals it, borrows it, shares it. It's no secret that print media is in trouble. It's why Gannett has gone from $80 a share in 2001 to less than $30 nowadays and why the New York Times has gone from $50 to less than $19 in the same time frame.Time Warner, too, is saddled with print by way of a huge magazine business. Time Warner is a content company for old people," Cramer says. "I try to get my kids to read magazines and newspapers, but no kids do. It's a tragedy."

He doesn't care too much for book retail either.

Patent Approved: Is This A Joke?

Under the title "Can the Publishing Industry Be Saved" was a press release describing a "Method and System for Customized Print Publication and Management." I was curious. I read the press release and it immediately made me wonder how anyone could get a patent for what was described. So I searched for the patent description. This looks to me like custom publishing which has been going on for forever but perhaps I am missing something: Like some thing patentable.

The following is a description of the patent application which has apparently been approved by the US Patent Office.

A method (Figure 3) for creating and managing customized print media through an enhanced content management process is disclosed. A print media customer, which may be an individual or organization, is profiled to determine content preferences (step 122). Profiling may be based on face-to-face or electronic surveys, Internet usage patterns, buying patterns, or other criteria. Content associated with the preferences is obtained and analyzed (step 124). Content affinities, or relationships between the content and other content in a content network, are determined, and may influence the print media produced (steps 128 and 130). A history of the content is maintained, to ensure content is not duplicated (step 126). Both substantive and non-substantive content, such as advertising content, is used. Both the content and layout of the print media can be customized (step 132).

The "steps" refer to a diagram. Further details of the above appear here. The description of the patent includes the following:

This invention provides a comprehensive method for effectively creating and managing customized print media through an enhanced content management process.

Summary of the Invention: In accordance with the embodiments described herein, method comprises customizing print media for organizations and individuals. The information for customization may derive from computer-based applications, internet-based sources, or more traditional, non-electronic survey techniques.

And then lastly,

While the invention has been described with respect to a limited number of embodiments, those skilled in the art will appreciate numerous modifications and variations therefrom. It is intended that the appended claims cover all such modifications and variations as fall within the true spirit and scope of the invention.

Is this yet another example of the USPO inability to guage real innovation versus patenting "processes." Or is PND over reacting?

Champions Again (Of Europe)

Only wish I was there. BBC Report.

B&N In Competitive Benchmarking

According to the WSJ via Reuters, B&N is interested in checking out Borders books. From the report:

Barnes and Noble has put together a team of executives and advisers to look
into the possible acquisition, the Journal said, citing a person familiar with the situation. Borders said in March that it might sell itself as it has struggled with liquidity and economic issues that have cut into customers' discretionary spending.

Time will tell if this amounts to much.

Twitter

Mike Hyatt, CEO of Thomas Nelson has a great how to for setting up and using Twitter. For those of you like me this is the guide to use. Mike's philosophy on social networking is you have to use it and experience it in order to pontificate on it. Obviously, understanding all social media tools is also critical to understanding how customer may/could/do interact with your content.

Link Here.

And while you are there, check out his "what I have learned in four years of blogging"

Dohle to Head Random House: UPDATE

The search term 'Marcus Dohle' sat highest on the list of queries to hit the blog site yesterday, so it was apparent to me that the word had leaked out that Dohle was about to be announced as the new head of Random House. No official announcement has been made yet but Reuters and IHT are reporting that a statement will be made later today.

(Also, looks like his name is spelled with a K and not a c: Markus).

UPDATE FROM BERTELSMANN CORPORATE:

Hartmut Ostrowski, Chairman and CEO of Bertelsmann AG, announced today that Peter Olson, 58, will step down at his own initiative from his positions as Chairman and Chief Executive Officer of Random House and as a member of the Executive Board of Bertelsmann AG, effective May 31. Olson will pursue an academic career. Markus Dohle, 39, will become the new Chairman and CEO of Random House. He was appointed by the Supervisory Board of Bertelsmann AG and will succeed Mr. Olson on the Bertelsmann Executive Board as of June 1. Mr. Dohle is presently member of the Arvato AG Executive Board and CEO of Arvato Print. Dohle’s successor at Arvato will be announced shortly. The Direct Group North America reporting line will shift from Peter Olson to Bertelsmann’s Chief Financial Officer Thomas Rabe.

In addition to the above announcement, Ostrowski also announced that

Richard Sarnoff, President of Bertelsmann Digital Media Investments and a member of the Supervisory Board of Bertelsmann AG, will take on the additional role of Co-Chairman of Bertelsmann, Inc., reporting to Bertelsmann CFO Thomas Rabe, effective immediately. In this new position, Mr. Sarnoff will play a key role in Bertelsmann's strategic and corporate development activities in the US, where he will work in close cooperation with executives from the divisions and the Corporate Center. Hartmut Ostrowski stated: “The US market is the world's largest and most dynamic in media as well as services, and as Bertelsmann both refines and expands our portfolio of activities in the US, we are fortunate to have an executive of Richard Sarnoff's caliber, profile, expertise, and background to take on the Co-Chairman role at Bertelsmann, Inc.”

Cengage Reports Continued Improved Performance

Cengage Learning posted third quarter results last week which showed continued improvement over their 2007 performance. For the quarter, revenues of $286.2mm were 7.4% higher than prior and EBITDA of $21.8mm was significantly higher than the $0.4mm they posted in 2007. YTD revenues for the nine months were $1,432.7mm a gain of 3.3% and EBITDA of $509.0mm represented a 6.7% improvement over the performance a year earlier.

Segments:

Academic and Professional:
Revenues for the quarter up 17.3% to $157.6mm with EBITDA up sharply to $13.6mm
YTD Revenues up 6.8% to $948.9mm with EBITDA up 6.2% to $414.2mm

Gale:
Revenues for the quarter were down 5.5% to $61.9mm with EBITDA down 11.7% to $21.1mm
YTD Revenues down 4.4% to $229.3mm with EBITDA up 4.8% to $102.6mm

International
Revenues for the quarter were up 9.4% to $67.3mm with EBITDA up 87.9% to $(0.7)mm
YTD Revenues were up 7.7% to $259.3mm with EBITDA up 18% to $35.4mm

Presentation

Thoughts on a Publishing Manifesto

Sara Lloyd of The Digitalist has a series on the future of publishing in the 21st century. The series sets some of publisher's challenges into context. She summarizes the first installment as follows:

The locked-in perception of the book as a unit or a product has also led to digital ‘strategies’ which largely consist of the digitisation of existing print texts in order to create eBooks. This in turn has led to an obsessive focus on the reading device and a perception that the emergence of a ‘killer device’ will be a key driver in unlocking a digital future for books in the way that the iPod was, say, for music. This is a flawed perspective in a number of ways, not least because it fails to recognise the enormous amount of online or digital ‘reading’ that already takes place on non-book-specific devices such as desktop PCs, laptops, PDAs and mobiles, but also because it fails to recognise that the very nature of books and reading is changing and will continue to change substantially. What is absolutely clear is that publishers need to become enablers for reading and its associated processes (discussion; research; note-taking; writing; reference following) to take place across a multitude of platforms and throughout all the varying modes of a readers’ activities and lifestyle.

Big BullyBoy Amazon

UK's Publishing News has a report on UK publishers increasing concern over Amazon's bullying tactics. From their report:

PUBLISHERS ARE REACTING angrily to what one senior executive described as a “crude” attempt by Amazon to increase its discount. “It is going from publisher to publisher with extortionate demands, and if it does manage to get a figure from one publisher it is then going back to the first house and saying x has agreed to such-and-such.”

Bloomsbury rec­ently had a terms dispute with the bookseller which resulted in Amazon removing the 'Buy Now' button from certain Bloomsbury titles on its site. But one CEO commented: “We are prepared to lose a year's sales with Amazon. They may try many things but we are not moving. We have been foolish enough to give in and grant generous terms in the past, but we're not giving any more.”

Book Launch 2.0

This is funny video about book promotion in the web 2.0 age. Sadly, the 1.0 world wasn't that great but it's only got worse.

Tip of the hat to Brantley

AAP Supports .ePub Standard

Last week (somewhat out of the blue) the AAP announced that on behalf of their members they were supporting the .ePub standard for electronic [book] texts. On the surface, this is a positive reflection of two industry groups working together in support of industry standards however, the commercial results of this letter of support will be minimal in the industry. Certainly, the largest US publishers who are the important members of AAP would need no encouragement to use the .ePub standard (and they are) if there were commercial advantage in doing so. The real background issue to this announcement is Amazon.com which typical of the company have spurned the standard approach and are not using the .ePub standard with the Kindle.

Adam Hodgkin at Exact Editions reports on the same announcement and captures the essence perfectly:

It is a mostly waffly and empty letter and will not carry weight in the tussle between Google (which should have minimal need for the EPUB format) and Amazon which is broadly on the books-are-a-file side of the fence and ought to be using EPUB for its Kindle, but is not. Whether digital books are citeable and searchable, page-fixed, digital resources; or electronic texts within a Kindle/Sony/Iliad reader will be clearer in a year or two. I doubt that it will be settled by October of this year.

Publishing In The Digital Age

A podcast is now available for a panel meeting I participated in. I posted the presentation that accompanies the panel discussion (here) and this new link is to the podcast. My session is in part four.

Informa In Play?

The Times is reporting that private equity groups including Carlyle and Apax are looking closely at Informa although no official bid has been made for the public company. From the article:

Carlyle and Apax are among those considering a bid for the group, which has a arket capitalisation of £1.64billion. No approaches are understood to have been made. Informa's shares have fallen almost 40 per cent since it announced the acquisition of Datamonitor for £502million in May last year amid widespread de-rating of Media stocks amid fears of an economic slowdown. Some analysts have raised concerns about Informa being hit by its high debt levels after the Datamonitor acquisition and partial dependence on the financial services sector.

Earlier this year, Informa has announced that David Gilbertson would resign as chief executive and from the board to take up the role of CEO at EMAP. EMAP has itself been purchased by a private equity group and the move by Gilbertson was a surprise. Together with now current CEO Peter Rigby they had built Informa into a the largest provider of Trade Shows in the world and a significant professional publishing company.

Tom Waits Press Conference

Say hi to your mother...

Is the World Watching Random House?

The FT speculates with the aggrandising title, All Eyes on Random that we are all on the edges of our seats wondering who will be the next CEO of Random House. The paper suggests that RH is set to be managed by someone outside the industry either from the services unit Arvato or the Direct Group. From the article:

People familiar with Random House’s parent Bertelsmann said that the German media group had decided against promoting Random House UK head Gail Rebuck or German chief Joerg Pfuhl in order to bring a fresh pair of eyes to the
business. In his first high-profile personnel decision, Bertelsmann chief executive Hartmut Ostrowski is expected to opt for a Germany-based executive from either media services division Arvato, the unit he once ran, or book-clubs unit Direct Group.

Bertelsmann is famous for placing relatively young executives in positions of high responsibility and the paper goes on to mention one Marcus Dohle a 39 year old executive at Arvato.

Noting how Arvato under Ostrowski was able to expand the size of their competitive marketplace by expanding their business offering, the paper suggests that is how Ostrowski would like Random House to think. Other publishers in the professional and information segments have been doing this successfully for a number of years, but the strategy has yet to be proven in trade. Publishers such as Elsevier and West now compete in markets that are an order of magnitude larger than what could be considered traditional publishing. I believe something of the same model can be developed for trade and all of the major trade publishers will be thinking the same thing. Time will tell which publisher gets there first.


And there is more from New York Magazine:

A stronger personality might have disciplined Random, but there’s a good case to be made that the conglomerate was a victim of its own strategy. Size gave it strength against bookstores, but big-box outlets and Amazon provide sales velocity now. Random, and the rest of the industry, has little or no leverage with them. Were they really going to keep Grisham out of Costco? What would they get in return?
Meanwhile, Random’s size became a liability. Even with megahits like Bill Clinton’s memoir and The Da Vinci Code, the company’s annual revenue has been stagnant. To maintain its 20 percent share, the company has to publish around 2,000 titles, while more-efficient rivals like Hachette do under 500 titles for about 10 percent of the market. It’s a quarter of the work for half as much market share.

Personally, I find the construct of this article a little silly. It ends with the suggestion that Olson saw himself as 'last of the publishing moguls' - did he? I'm not too sure that one holds up.

Champions Again

Manchester United retained their Premier League title this afternoon with a tense win away to Wigan. Away to Wigan meant that most of the ground was filled with United supporters some of whom were paying $1000 a ticket to get into the ground. We are now one win away from an impressive double. The Champions league final against Chelsea is a week on Wednesday. The season didn't start so hot and the team went from this one off the bottom:






to the top having pushed aside the hated Arse but almost letting in Chelsea by the back door. You may wonder why I have this screen shot from the start of the season but I had faith the team would win.

I hear red is still the prevailing color choice in Moscow.

Bridge Tagged With ISBN

When I first became involved with ISBN's I heard and received a lot of grief about ISBN's applied to non-book items like rulers and teddy bears and so involved did I become with the ISBN agency that I sometimes joked that I would apply for my own number and have it tatooed on the back of my neck. Happily, that never happened. Tagging a bridge with an ISBN is something that few of us would have anticipated. This is doubly concerning because this is a clear re-use of an existing number which is a big no-no in ISBN land. From the Torontoist:

It seems that some Toronto taggers are no longer content to scrawl their own names on blank concrete canvases around the city and are trying instead to make more of a cultural statement. Last year, references to composer Gustav Mahler popped up in several places around town. This year, a more cryptic stencil has appeared on the Humber Bay Arch Bridge, boldly proclaiming "ISBN 486-28495-6" for all to see and ponder. This International Standard Book Number turns out to be a paperback edition of Henry David Thoreau's Walden; Or, Life in the Woods.