Barnes & Noble bookstore is back on the expansion trail, with 30 news stores planned for 2023. ... [+] (Photo by Drew Angerer/Getty Images)Getty Images
Do you like a story with a twist? Rumors of a murder with no body? The tale of a plucky comeback king? And all with a happy ending? Well, this one has it all. For our plot we have a traditional retailer threatened by a huge, new-fangled corporate (that will be Amazon AMZN AMZN ) and a mysterious stranger, not from around here (that will be former banker James Daunt), riding in to save the day (thanks to hedge fund Elliott Advisors). Let's start at the beginning of the end. A little over a decade ago Barnes & Noble BKS seemed to be all sorts of wrong. It had a huge store estate at a time when books faced fierce competition from a growing raft of digital distractions, from streaming services to gaming, plus e-books and online bookselling. But – spoiler alert – it turned out not to be dead after all.
The New York-based bookstore retailer has opened 16 new bookstores this calendar year and the company says it has over 30 further stores in development for 2023. Although the company still operates about 125 fewer stores than its peak of 726 in 2008, back then a reasonable bet would have had its likely store count in 2022 around zero.
So what's prompted the turnaround?
James Daunt: Bankers Turned Bookseller
Barnes & Noble, like other physical booksellers, struggled for about a decade as Amazon and other online book sellers ran roughshod through their market share. In 2019, U.K. hedge fund manager Elliott Advisors acquired Barnes & Noble and its 627 stores for $683m and put James Daunt at its head.
Daunt – a former banker – had established an independent bookstore chain in London in 1990 and the 58-year-old had been appointed to rejuvenate U.K. high street bookseller Waterstones in 2011 under the ownership of Russian billionaire Alexander Mamut. After several years cutting costs and reworking strategy, the company began to turn a profit by 2016.
James Daunt, CEO of Barnes & Noble, Waterstone's, and now Blackwell's. (Photo by Leonardo ... [+] Cendamo/Getty Images)Getty Images 'One of the advantages of going bust is all of that complacency, that God-given right to exist, is finally punctured,' Daunt said of the strategy.
Elliott Advisors bought that business in 2018 and a year later hopped over The Pond to acquire Barnes & Noble.
Not that the early days were without bloodshed. Daunt halved the number of Barnes & Noble's head office staff and sacked 5,000 employees as the business was reshaped for the future.
And at the outset of the pandemic, Daunt told store managers at Barnes & Noble to take every book off their shelves, 'weed out the rubbish', make each section flow and put their stores back together again. The overhaul is a strategy that he had deployed many times over the previous decade.
Barnes & Noble Turns Full Circle
Gardening (aisle six, hobbies and interests) done, Barnes & Noble has two Boston-area locations that were formerly Amazon Books stores (oh the irony) slated among 30 new stores due to open in 2023. Barnes & Noble also plans several much smaller format stores than it operated in the past, including a 7,000 sq ft store down the street from its former 50,000 sq ft flagship store in Manhattan.
Indeed, these are heady days for a bookseller that was transformed just over 50 years ago, in 1971, by Leonard Riggio when he acquired the Barnes & Noble trade name and flagship bookstore in Manhattan, merging it with his own bookselling business.
Within a few years, he had grown the Barnes & Noble Fifth Avenue store in New York into ‘The World's Largest Bookstore', with 150,000 titles and throughout the 1970s and 1980s, the company made numerous acquisitions to become the second-largest U.S. bookseller.
Elliott Advisors Buys The Book
For its part, current owner Elliott Advisors has not stopped turning the page on its bookselling story. In March this year it acquired Blackwell's, the 143-year-old bookseller, adding the U.K.'s largest independent chain to a British portfolio including Foyles and Hatchards.
As with previous takeovers, Waterstones has kept the Blackwell's name for its 18 stores and, overseeing it all, Daunt has become a kind of custodian for independent bookselling.
It's been a hard road but, as our story nears its conclusion, sales at Barnes & Noble have started to rise, while Waterstones has recovered from a dip during the pandemic.
Elliott Advisors is likely to exit its investment over the course of the next few years, which could see Waterstones and Barnes & Noble go public.
Now, that's an ending no one could have foreseen.