I looked into it and found five signs that Books-A-Million, now the second-largest bookseller might be heading into trouble:
"Net
sales for the 13-week period ended July 30, 2011 decreased 11.4% to
$106.4 million from net sales of $120.0 million in the year-earlier
period. Comparable store sales for the second quarter declined 12.9%
compared with the 13-week period in the prior year. Net loss for the
second quarter was $2.9 million, or $0.18 per diluted share, compared
with net income of $1.9 million, or $0.12 per diluted share, in the
year-earlier period.
For
the 26-week period ended July 30, 2011, net sales decreased 11.2% to
$210.4 million from net sales of $237.0 million in the year-earlier
period. Comparable store sales declined 13.1% compared with the same
period in the prior year."
Why? Commenting
on the results, Clyde B. Anderson, Chairman, President and Chief
Executive Officer, said, "Results for the quarter reflect a continuation
of the trends that have been affecting our business since the beginning
of the year. A soft publishing lineup, the effect of e-book migration
and the impact of Border's liquidation all contributed to the decline in
comparable store sales. In this environment we have been focused on
further developing the growth categories in our stores in preparation
for the second half of the year while our balance sheet remains strong."
What are exactly the "growth categories" they focus on further developing? It's not clear. Somehow I find this explanation as well as action plan not very reassuring to say the least.
2. Cash reserves are down by almost 40% - Although CEO Anderson said "balance sheet remains strong", you see that cash is down by 38% compared to the end of January 2011. The company has now only 4.8 million in cash and almost 95% of its assets are in its inventory ($192.3 million out of total current assets of $203.7 million) - again, not very relaxing given the fast changes the book business is experiencing.
3. The stock market does not believe in Books-A-Million - If you had $300 on January 1, 2011 and decided to invest $100 in Amazon, $100 in Barnes and Noble and $100 in Books--Million, your investments would generate you the following return as of yesterday:
|
1/3/2011 |
9/9/2011 |
Return |
| Amazon |
184.22 |
211.39 |
14.75% |
| B&N |
15.42 |
11.38 |
-26.20% |
| Books-A-Million |
5.86 |
2.6 |
-55.63% |
The company in its latest annual report explains that "recent market volatility has exerted downward pressure on our stock price, which may make it more difficult for us to raise additional capital in the future."
4. No clear strategy for the brick and mortar stores - Books-A-Million presently operates 232 stores in 23 states and the District of Columbia. Just like with B&N it's not clear what's company's strategy to transform these stores back into an asset. The vast majority of the company's revenues come from bookstores and therefore lack of clear strategy is creating a risk and puts in question the company's ability to increase its sales.
5. No e-reader - Just like Borders, Books-A-Million didn't develop an e-reader of its own and sells B&N's Nook. It means the company is more limited in growing its digital sales and is very much depended on B&N and their success to keep developing the Nook. Bottom line: Books-A-Million does not have the same digital cushion B&N has.
I hope I'm wrong, but Books-A-Million seems to be vulnerable now. If they won't be able to find the right strategy for their brick and mortar business they can be very soon in the same position Borders found itself not too long ago.
Yours,
Raz @ Eco-Libris
Eco-Libris: Plant trees for your books!
