The company recently fired its fourth noninterim CEO amid its financial troubles, but there’s no leadership crisis, its chairman vows.
Leonard Riggio radically altered book selling in the United States when he bought an ailing New York City bookstore and turned it into a national chain of megastores.
Now, his company — Barnes & Noble — is floundering, the publishing industry that depends on it is worried, and Riggio has nobody to turn to but himself.
That much became starkly evident last month when Barnes & Noble abruptly fired its chief executive, Demos Parneros, with little explanation. Parneros was the fourth noninterim chief executive in five years, a remarkable amount of turnover at a large company.
Career: Built Barnes & Noble from a single Manhattan bookstore in 1986 into national chain of superstores.
Current position: Chairman
Stake: Owned 10.9 million shares or 15 percent, as of December
Source: NYT, S&P Capital IQ
The news left alarmed publishers and investors complaining that the chain is once again dealing with a management vacuum when it desperately needs to adapt and innovate. Sales are falling. The Nook, Barnes & Noble’s attempt at selling electronic books, became a financial drain. Critics say the company lacks direction, sometimes seeming to prioritize sales of gifts and tchotchkes over books. For investors, the effect is already evident: Barnes & Noble’s stock price is down 60 percent over the past three years.
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Riggio, 77, the company’s chairman, disputed the notion that Barnes & Noble is mired in a leadership crisis. After all, he said during an interview at the company’s headquarters on New York’s Fifth Avenue, he has always been there.
And he has a plan to turn things around.
“I have a big stake in the business, I founded it and I’ve been here forever, so I think there’s a lot of stability that comes with that,” Riggio said. “If we’re without a leader, I’m it.”
Riggio built Barnes & Noble from a single Manhattan bookstore into a national fleet of superstores, many with more than 100,000 titles, transforming the business of selling books from a genteel and fusty profession into a mass-market moneymaker. The company boasts that it has sold 6.7 billion books since going public 24 years ago.
The expansion was so successful that the company was frequently vilified as a corporate behemoth driving local bookstores out of business (see: Meg Ryan and Tom Hanks in “You’ve Got Mail”). Between 1995 and 2000, the number of independent bookstores fell 43 percent, according to the American Booksellers Association.
But the factors that buoyed the chain’s expansion — the growth of malls and shopping centers and big-box stores that sell everything — have reversed, with the rise of Amazon and other online retailers leading to dwindling foot traffic and sales.
At the same time, after decades of declines, independent bookstores have been resurgent, aided by an increased interest in localization and curated experience. Even Amazon is expanding into brick-and-mortar bookstores, with more than a dozen stores across the country and more in the works.
“The indies decided that rather than trying to compete on price and inventory, we’re going to provide our customers with a curated experience that’s hypersensitive to the customers in that community,” said Ryan Raffaelli, an assistant professor at Harvard Business School who has studied why independent bookstores are rebounding despite Amazon. “Barnes & Noble has struggled to figure out where they fit in the larger ecosystem, given that that continuum continues to spread further and further apart.”
To adapt, Riggio said that Barnes & Noble would close big, underperforming stores and open smaller ones in more highly trafficked areas. In the past decade, the chain has closed more than 150 stores and now operates 633.
“We have to move back to where the action is,” he said. “We have to follow the population.”
But he disagrees with another diagnosis of the problem: that he is a micromanager who does not give his chief executives room to operate. People who have worked closely with him described him as self-assured to a fault.
“Anyone who joins there knows that the chairman is very hands on,” said John Tinker, an analyst at Gabelli & Co.
Riggio had planned to retire in September 2016. But then the company fired Ronald Boire, who had served as chief executive for less than a year, saying he was “not a good fit for the company.” Riggio decided to step in as acting chief executive.
Eventually, Parneros, the most recent chief executive, was hired. He lasted 14 months.
Riggio declined to discuss Parneros’ firing, noting that the company has already said all it can on the matter — which is that he was terminated without severance for violating policies. Barnes & Noble was careful to note that the violations were not related to financial matters or fraud pertaining to its finances.
He disputed the idea that he does not give his chief executives room to operate.
“I don’t micromanage anything,” he said.
Some in the publishing industry see potential for Barnes & Noble to solve its problems. They point to successful large chains in other countries, like Waterstones in Britain and Indigo in Canada, as potential models for how Barnes & Noble might turn itself around. Rather than a chain of homogeneous locations, Waterstones now operates more like a constellation of independent stores, said James Daunt, the company’s managing director, who took over in 2011. The individual stores vary widely in terms of size and title selection, and local booksellers are encouraged to tailor their stores to the surrounding community.
Indigo, which is expanding into the United States, has alternatively positioned itself as “a book lover’s cultural department store,” with a cafe, toys, music and lifestyle products.
“There’s a lot of low-lying fruit out there that they can harvest,” said Richard Schottenfeld, an investment fund manager who has acquired a 5.7 percent stake in Barnes & Noble and has met with Riggio and company executives to discuss operational strategy. He pointed to the company’s “badly designed” website, the “long overdue” debut of book clubs this spring and the company’s “out of whack” operating costs.
Riggio should focus less on where to close and open stores and more on how to convert browsing visitors into paying customers, Schottenfeld said.
“It’s not as much about the ideas as it is the execution of those plans — the company is mismanaging the opportunities in front of them,” he said. “It seems like you can get more dollars out of people if you just figure out what they want to buy from you.”
Some publishing executives privately express hope that Barnes & Noble will be sold, perhaps to Indigo. Riggio did not rule out the idea of a sale, although he said he did not think “this is the time to sell the company.”
“We’ll be responsive to our shareholders,” he said. “We always have to entertain offers that come along.”