Barnes & Noble Looks to Revive Flagging Sales by Getting Smaller
Barnes & Noble is the latest retailer to discover that less is more sometimes. Coming off another tough quarter, the big-box retailer’s executives said recently that the path to better financial performance could lie in operating smaller stores more focused on books with a more limited selection of items like games and toys. “Our goal is to get smaller,” Barnes & Noble Chief Executive Demos Parneros, who took the reins in April, told Wall Street analysts on a conference call. “We want to have smaller stores that are more efficient.”
It is easy to see why one of the pioneers of big-box retailing would be interested in making a major change to its business model. Barnes & Noble said that comparable sales fell 6.3% in the quarter ended Oct. 28, the seventh straight three-month period to see sales decline. The company said half of that decline stemmed from big sales last year of a Harry Potter book and the absence in this year of a similar blockbuster. But the problems also stemmed from non-book products that are not catching on with customers. Comparable sales of those products were down even more sharply than the company average.
At the same time, book sales grew more promising as the quarter wore on, prompting Barnes & Noble, the nation’s largest bookstore chain, to double down on selling, well, books. “Going forward, we will place a greater emphasis on books, while further narrowing our non-book assortment,” Parneros said, signaling a reversal of Barnes & Noble strategy to diversify its offerings and jump on hotter categories like games and toys. The company has nonetheless benefited in recent years from hot trends like coloring books and vinyl records to prop up sales. (Last year it blamed the absence of a hit like Adele’s 2015 album “25” for its dismal holiday season numbers.)
So Barnes & Noble is not exiting these categories, but will offer fewer such items, lest it find itself again with an overflow of unsold merchandise it can only clear at bargain basement prices. Such deeply discounted clearance sales were one of the reasons Barnes & Noble’s net loss rose nearly 50% to $30 million in the quarter. As for the future Barnes & Noble stores, Parneros said two new different-format stores would be instructive in how the chain opens new locations or remodels old ones. A new store in the Dallas suburb of Plano is only 10,000 square foot in size, compared to about 26,000 square feet on average. And another prototype is in Ashburn, Virginia.
Luckily for Barnes & Noble, its store leases tend to be relatively short, meaning some 20% of its 632 stores (it has closed about 20 a year in recent years) come up for renewal each year, allowing it to close stores as needed, or downsize them. That would help Barnes & Noble better maintain and refresh its stores, save on some rent, and simply make store more visually pleasing. It is a move that other retailers like Kohl’s, Target, and Macy’s have been trying out too. For now, Barnes & Noble needs to work with the fleet that it has since a few test stores will not move the needle anytime soon, and an overhaul of all of its stores will take time.
One thing Barnes & Noble is doing is giving customers who bought a book a coupon to get a discount on a coffee at its café. That, says Parneros, has led to the first increase in comparable sales within its cafés in a year in the month of October. Another is to encourage its booksellers to engage with customers, something that should go without saying for a bookstore given that it is a rare reason to buy a book in a store rather than online from Amazon.com. And staff expertise is a big reason for the resurgence of many independent bookstores.
Still, though Barnes & Noble has some coals in the fire, it is not easy to see how or how quickly those moves can bring the chain back to growth. It has struggled with weak shopper traffic for a while now and getting people to come back will not be easy absent a clear reason to. What is more, even as it makes sense for a bookseller to focus on books, the fact remains that though sales of physical books have stabilized vis-a-vis e-books, it is hardly a booming area.
Citations
- http://for.tn/2AlBKA7 – Fortune
- http://bit.ly/2xjmBRp – Publisher’s Weekly
Cirque du Soleil Seeks Growth Beyond its Circus Roots
In the past three decades, Canada’s Cirque du Soleil has reimagined the notion of a circus by crafting visually arresting aerial extravaganzas that are a world away from P.T. Barnum’s brassy Greatest Show on Earth. Yet at the new Cirque-designed NFL Experience in New York’s Times Square, the closest thing to acrobatics comes from the onscreen football players that audiences witness up close as they are immersed in the game through a combination of video, sound, moving seats, and even smells. For the 33-year-old Cirque, the joint venture with the National Football League is a chance to demonstrate how the creative minds behind its trademark shows can be harnessed for different formats as it expands into new markets with the backing of private equity firm, TPG Capital LP.
The collaboration, which uses digital technology and old-fashioned memorabilia to put visitors in the shoes of an NFL player, is one of several new directions for the Montreal-based company. It is now offering performances on cruise ships, developing a theme park in Mexico, adding its first show on ice, and expanding in China. Four months after the acquisition in July of music and comedy act Blue Man Group, the company even changed its name to reflect broader ambitions: Cirque du Soleil Entertainment Group.
A major influence behind the transformation is TPG, which has a majority stake in talent management company Creative Artists Agency LLC and co-founded film and television studio STX Entertainment; it has not disclosed its percentage ownership in STX. After acquiring a 55% stake in Cirque when founder Guy Laliberté sold 90% of the company in a deal with a total value of about $1.4 billion in 2015, the buyout firm overhauled management and helped develop the growth strategy. Seventeen of its 22 highest-ranking executives are new to the company. “We saw this as ‘Wow, we have this unique capability; we’ve got this global, recognized brand. There’s a lot more we can do,’ ” says David Trujillo, a TPG representative on Cirque’s board. Diversifying the company opens up options for its future, including going public, he says.
TPG helped beef up marketing to revitalize sales in Las Vegas, where Cirque runs seven permanent circus and musical shows in casinos. Tickets are now easier to buy on mobile phones, and prices fluctuate with demand. Cirque also has adopted more aggressive social media and corporate sales strategies. All this has helped revenue per available seat rise 20 percent this year, Trujillo says. An additional 11 shows are on tour in places including Madrid, Shanghai, and Perth, Australia. Cirque’s long-standing relationships with promoters and venues are being used to negotiate new stops for Blue Man shows, says Chief Executive Officer Daniel Lamarre. “Thanks to our distribution strength and our many promoters around the world, we’ve just given the Blue Man Group a new impetus,” he says. “We’re seeing benefits faster than we thought.”
Cirque’s headquarters complex in Montreal brings together creative teams, costume and accessory makers, as well as artists practicing acrobatics or learning how to do their own makeup. Instructions at the gym come in five languages, a reminder there are about 50 nationalities among the 4,000 employees.
Lamarre has not spent much time there lately. In October he traveled twice to China, where Cirque will inaugurate its first permanent mainland show, in Hangzhou, in early 2019. Half the artists in that production will be Chinese. Shanghai-based Fosun International Ltd., which owns 25% of Cirque, is helping it expand in China, where one show is already touring. A second show set to hit the road will be Cirque’s adaptation of the film Avatar, which was a huge success in China. The company’s overall ticket sales could double within five years thanks to China, where more permanent locations may be added, says Lamarre.
New growth avenues would be a welcome addition for Cirque, whose credit rating is “weakly positioned” because of the large amount of debt taken on to complete its leveraged buyout, says Alina Khavulya, an analyst at Moody’s Investors Service Inc. Expansion beyond circus shows could change that. “It’s a broader opportunity,” she says. “I don’t know that it’s less risk.” Other corners of the Cirque empire have moved beyond their circus roots. At 45 Degrees—a special projects unit named after Montreal’s latitude—the team recently helped design the show of German singing star Helene Fischer, featuring a 30-foot wall on which acrobats perform and a dress made of cascading water. Cirque’s multimedia arm, 4U2C, has worked on the concert tours of Bon Jovi and Justin Timberlake and pitched in on the NFL Experience. CEO Lamarre says the TPG-led owners have helped his team recognize the great potential the company has beyond circus performances. “We believe our expertise is in creation and in production—it’s for live experiences,” he says. “That’s the DNA of Cirque du Soleil.”
Citations
- https://bloom.bg/2Agkpe8 – BusinessWeek
- http://cnb.cx/2ANTPtM – CNBC
The Good News Is . . .
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- The number of Americans filing for unemployment benefits fell last week, dropping for a second straight week as labor market conditions tightened further. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 238,000 for the week ended Nov. 25, the Labor Department said. Economists polled by Reuters had forecast claims edging up to 240,000 in the latest week. Last week marked the 143rd consecutive week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller.
- Tiffany & Co., an international jeweler and retailer, reported earnings of $0.80 per share, an increase of 5.3% over year-earlier earnings of $0.76 per share. The firm’s earnings topped the consensus estimate of analysts by $0.04. The company reported revenues of $976.2 million, an increase of 2.8%. Management attributed the results to strong growth in its Asia-Pacific region and a widening of its overall gross margin.
- The Meredith Corporation—the owner of Family Circle, Better Homes and Gardens—agreed to purchase Time Inc. in an all-cash transaction valued at nearly $3 billion. The deal was made possible, in part, by an infusion of $650 million from the private equity arm of Charles G. and David H. Koch. Meredith, based in Des Moines, is a Midwestern publisher through and through. Its founder, Edwin Thomas Meredith, entered the media business in 1902 with a magazine called Successful Farming. He soon began the still-thriving Better Homes and Gardens, which has a circulation of more than 7 million. After Time Warner spun off Time Inc. in 2014, the publisher was left to fend for itself in a world increasingly turning its back on print media. Bedeviled by relentless cost cuts and executive turnover, the company has struggled to articulate a business strategy less focused on the printed page.
Citations
- http://reut.rs/2AmbLsk – Reuters
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2kdXs5h – Tiffany & Co.
http://nyti.ms/2kdXJFl – NY Times Dealbook
- The number of Americans filing for unemployment benefits fell last week, dropping for a second straight week as labor market conditions tightened further. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 238,000 for the week ended Nov. 25, the Labor Department said. Economists polled by Reuters had forecast claims edging up to 240,000 in the latest week. Last week marked the 143rd consecutive week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller.
Planning Tips
Guide to the Benefits of Setting up a Trust
Trusts offer a way to leave a legacy, protecting assets while avoiding the costs of probate, as part of your estate planning. Probate is the method of estate administration upon the death of an individual where that individual’s estate and assets are delegated. This process can cost thousands of dollars and be time consuming. To avoid this and to ensure that your loved ones receive the maximum value from your estate and assets, you can set up a trust. Below is a brief guide to the benefits that trusts offer. If you are considering setting up a trust be sure to consult with your financial and legal advisors to determine if trusts are appropriate for your situation.
Protection – You can protect your assets from lawsuits and probate fees. This is especially important for people who are in professions known for litigation such as doctors and lawyers. After a person passes away, his or her estate usually goes through probate, where the public is allowed to see the will and assets. Any creditors are paid off and if the individual has assets in multiple states, probate fees will be assessed in each state. Probate fees can range from 3% to 8% of your estate. This is in addition to estate tax and income tax that would also be imposed upon any estate. However, if you place your assets in a trust, you can shield those assets from public scrutiny and record. These assets are also off limits from creditors and not subject to probate fees. Also, by clearly designating beneficiaries through your trust, you can prevent fighting and lawsuits between heirs.
Taxes – Different kinds of trusts offer different tax protections. For example, a life insurance trust can protect life insurance death benefits from any estate taxes. You can also set up a trust fund for a child with a tax-free gift to the maximum level. To determine the best way to allocate your funds in a trust, it is advisable to talk with a trust specialist. Revocable living trusts designate a trustee to manage and control the property of the grantor. These are popular today because they offer management and provisions like credit shelter where estate taxes can be reduced. Additional tax benefits include savings from reducing transfer taxes and the size of the estate with charitable contributions.
Flexibility – Trusts offer ways to provide for beneficiaries in different ways. You can put aside funds for education or medical support, or decide at what age or interval, funds can be distributed.
Prudent Investment Strategy – The trustee has a fiduciary responsibility to oversee the management of trust funds honestly and correctly by law through regulation such as the Uniform Prudent Investor Act. This includes keeping the cash from a trust in an interest bearing account and having regular assessment of investment, risk, return and diversification. Your trustee can be an individual or an investment firm.
Legacy – Having a trust offers you a specific way to leave a legacy for the people, organizations and beliefs that you hold dear. You can designate exact amounts of contributions and any guidelines for bequeathing your assets.
Citations
- http://on.wsj.com/2BnhCNt – Wall Street Journal
- http://cnnmon.ie/2At8wSq – CNN Money
- http://bit.ly/2BzUZGB – Investopedia
- http://bit.ly/2AKyoK8 -com
- http://bit.ly/2AsplNt – FEDWeek.com
