Wall Street Site Questions Barnes & Noble

B & N Revenue Plunges From 6.75 Billion to 3.89 Billion Yet Still Paying An 8% Dividend – Big Shareholders Suckiing Out $$$$ ?

Seeking Alpha, a critical wall street and financial website, has questioned Barnes and Noble’s continuous dividend payout yielding 8%, asking if this is sustainable during recent huge drops in revenue.  Read the entire article, CLICK HERE.

Some comments on Barnes and Noble and Amazon for historiical background as follows (not part of the Seeking Alpha article):

B & N in past years made more bottom line money on the game business they purchased. The game sector, which was around 10% of revenue threw off about 90% of the profit. This has changed, but shows that their costs of selling books was always higher than the thousands of independent booksellers that they muscled out of business with the superstore fad. They failed to exploit their lead in the game business, which is now mainly online. They also failed years ago to play fair with the used book market when they had a chance to make a great deal with a company called abebooks. So guess who finally swooped in to buy abebooks? You guessed it, amazon, which now has a basic monopoly on online used book sales. B & N’s partnership with European giants in barnesandnoble.com also went south with huge losses until they were forced to buy out their Euro partners. 20 years of bad decisions has led to this moment. Is the high dividend just the mechanizim for big shareholders to suck the carcass dry?

Pickwick to B. Dalton to Barnes & Noble to Gone Forever.

Nobody wants to look under the hood of the B & N engine, where you would find that the 8 cylinder engine is down to 4. For instance, in Southern California, they have closed many of their best store locations. Gone is B & N from Pasadena in the Old Town District, gone is B & N from the Encino area of Ventura Blvd. And don’t forget the huge loss they got when they bought B. Dalton books, which operated 798 stores in malls across America. Their mis-management closed all of them, including the big Hollywood Boulevard Store that was called Pickwick Bookshop that B. Dalton had bought. How soon you all forget the decades of bad management, probably over 1,000 stores closed, the thousands of employees laid off, the financial losses to shareholders, the mess with the European media giants in BarnesandNoble.com. The question is really: Was B & N a stock fraud for the last 20 years, or just the worst management ever seen?

Barnes and Noble does a lot of things right. They have great selection. They have a nice clean website. They have a lot going for them with Nook, self-publishing, and many other strategies. They have nice Starbucks cafes, wi-fi, and good locations. So how can they improve and survive? Various articles point out the disaster from bad upper level management. Add to the list the recent dumb idea of in-store beer and wine restaurants.

They can turn some things around by having more in-store celebrity author events, use video marketing on social media, live stream the events from their stores with easy ordering from home couch potatoes, and everything to get folks into the stores where impulse buys will help the bottom line. For the stay at home crowd, they should compete with amazon by selling used, rare and out of print books. They did this at one time, with thousands of great vendors who dropped shipped. The program could be re-started to compete with amazon. It went away due only to bad management at the top level. Amazon has a lot of flaws and weakness in the way they treat their vendors. By being fair, B & N could lure many thousands of them away from amazon and add a huge income stream. Forget the beer, go with the books.

Amazon, which has a monopoly on used book sales in the U.S. and a stranglehold on new book sales, continues to erode sales at Barnes and Noble. Even President Trump has recently commented on amazon’s more than cozy deal with the U.S. Postal Service.  What he failed to mention was not only does amazon get special postage rate deals, but it also has the post office delivering mail on Sundays in selected cities.  This has got to be a loser for the Post Office, it totally obliterates the economy of scale needed for sustainability.  What is interesting is to go way back in the history timeline to the 1950s.  The Post Office delivered mail twice a day during the week in Los Angeles, and I assume, most other cities.  What happened to that?  We always think our civilisation as getting better every year, when the truth is far different.  Not only has the Post Office deteriorated, closed thousands of offices, etc., but now they seem to be tied into a losing deal with the amazon monopoly.

Let’s hope tha 2018 will bring some sanity back to the world. It’s just my opinion, but: Amazon is a monopoly and should be broken up.  Google should be seized by the U.S. Government and the search engine made a national public utility.  Barnes and Noble needs to get its act together, it has opportunities and possibilities, but the prognosis for them is somewhat grim.  Happy New Year everyone!

What do you think?  Bookseller and Book Lover comments welcome!

Update January 4th, 2018.   Barnes & Noble, Inc. (NYSE: BKS) today reported that total holiday sales for the nine-week holiday period ending December 30, 2017 as declining 6.4%.  Comparable prior year store sales also declined 6.4% and online sales dropped 4.5%.  The stock price tanked to $6.50 per share.  A grim picture indeed.  The question now becomes can Barnes & Noble survive at all?  Is there even any time left for a new management turn-around plan?

 

 

Hollywood Boulevard Bookseller Follies

Whatever Happened to “Frugalius Maximus”?

by Paul Hunt

Pickwick now a souvenier shop

Pickwick now a souvenir shop

Jim Hubler is quite a character.  He owned Partridge Book Store in Hollywood for years. This was right next door east of the big Pickwick Book Shop, which was probably world famous at that time, 1970’s through the early 1980s.  Jim had a simple strategy for success: his shop was next door to Pickwick, and he existed by a parasitic relationship, he being the parasite.  As I remember, Jim worked in the store as a young man, and when the owner passed, his widow sold the store to Jim, who made payments on it until he owned it. Jim told me that Mr. Partridge, a graduate of UCLA, made a lot of money in the parking lot business in San Francisco, before he got into the book business.

The shop was unusual in many ways.  First were the hours of operation.  No 9 to 5 here, he adjusted his hours to take full advantage of his colossal neighbor, and would usually show up around 4pm, to the cheers of a waiting group of book scouts and customers.  The trick was that he stayed open really late, usually until past midnight, often until 1am.  When Pickwick closed at 10pm a big mob of customers flooded right into Jim’s place.  It was amazing to see this, but that makes perfect sense, since many book lovers are night owls, and where else, even in old Hollywood, could you go to a bookstore that was open that late.  Partridge became a meeting place for all kinds of characters and Jim raked in the cash, making most of his money from 10pm to 1am, when all the other book dealers were sleeping.

A Strange Way to Organize a Bookshop

Another weird thing about Partridge was the way the books were organized, something that I have never seen anywhere else. Jim organized the books by Publisher!  Although he did have used books and a lot of remainders, most of his stock was new.  By organizing by Publisher it was really easy for Jim to check on stock for reorder.  This was long before computers, and Partridge was a one-man act, and he had quite an array of fascinating old shelves and racks.  I still remember the Modern Library rack, packed with all those wonderful little books that are now considered worthy of collecting.  Jim had a great knowledge base in his head and anyone asking for a book would be pointed to the correct publisher’s shelf.  I was reading a lot of science fiction back then, and the Ballentine paperback rack was one of my favorites.  Balllentine also published a great series on World War 2, with a lot of “original” first editions that are still collected today, some 50 years later. It was also the time that Ballentine was publishing the now legendary “Unicorn” fantasy series. The Publishers, by the  way, loved this system, it was an immense ego boost for them to have their own rack in the middle of Hollywood, sort of a showcase for them.

Jim stocked a lot of remainders in order to cater to the Pickwick crowd.  As anyone who ever went into that great store would remember that the ground floor was new books, the small mezzanine  had something or other that I can’t remember, but the top floor was packed with remainders, many from England.  It was overwhelming and so tempting to just spend  your entire paycheck on them.  Jim realized what a big draw Pickwick’s top floor was, so he created a mini-remainder area in his shop.

Another funny thing about Jim, but not so funny for the frustrated publishers, was how he turned book club editions into cash.  He would buy massive quantities of clean Book-of-the-month club editions from book scouts.  As long as they were clean, with nice dust jackets, Jim would pay 50 cents or $1.00 for them.  At first I was puzzled about this, but I was just starting out as a book scout, and I was trained not to pick up book club editions because collectors wanted the first editions.  Sometimes it was hard to tell, because used bookstore owners would “clip” the corner of the dust jacket so it looked like it once had a price on it, so you spent a lot of time flipping over the back of the dust jacket to look for the little dot on the back of the binding which would indicate a Book of the Month edition.

Introducing “R.E.Turner”

Jim’s nick-name was “R.E. Turner”.  He got this because when he sent back returns to the publishers he would include mounds of Book of the Month editions.  I was in the shop once when one of the angry publisher’s reps was trying to lecture Jim that this was not acceptable to the publisher, and they weren’t going to give him credit for the book clubs. Jim told him that they had better give him credit or else.  The rep didn’t want to lose this good account and was pleading with Jim that in some cases he was actually returning more copies than he originally ordered.  “Stop crying about it to me,” Jim said, “you guys make tons of money, just send them out as remainders to someone else.”  Mr. R.E. Turner had spoken.

The Saga of Louis Epstein

Jim had a long run at Partridge, until fate smiled at him, and boy, did he smile back.  Here’s what happened to the best of my recollection:  Old man Louis Epstein was the owner of the mighty Pickwick Book Shop, the central fixture in the galaxy of book stores that were in Hollywood at that time.  Epstein had started out in downtown Los Angeles in the really old days of the 1930’s, in a little shop near the original Dawson;s Book Shop, around Wilshire and Figuroa.  He bought the shop from another old bookseller, who gave him a piece of advice:  “Never pay more than 10 cents for any used book and you will make a profit.”  That wasn’t much money in the 1930s, but things have gotten worse now, with amazon.com selling books for a penny. Who would have known?  But the formula worked for years, both for Louie and his brother, who worked at another used book shop called Bennett and Marshall.  As a side note, when Louie’s brother was in his 80s, he was still scouting for rare books.  He was a tall, stately man, and I remember seeing him at estate sales in the 1980s.  He would charge into the sale waving his stout wooden cane around and bellowing at the top of his voice “Clear the way, Bennett and Marshall coming through for the books.”  Bennett and Marshall, once eminent rare book dealers, had pretty much faded by the 1980s, and were under new ownership for a while, and then disappeared entirely from their retail store in West Hollywood.  But hey, the bellowing and the wooden cane searing through the air were enough to clear the way for Louie’s brother and scare off the competition. By that time, nobody knew who the hell Bennett and Marshall were, but it was a good idea not to rile the tall old man, whoever he was.

Epstein dealt in literature and poetry, but was having a hard time of it, all the while seeing his neighbor Ernest Dawson doing a pretty good business with a lot of the L.A. trade passing through his doors.  Then fortune smiled on Louie.  A movie studio came in and wanted to rent 5,000 books.  When pressed for a rental amount, he blurted out 5 cents a day per book.  The studio folks were happy with that, and Epstein wrote up a rental document, which was to last for 30 days.  Time passed, and the books never returned. Epstein called a few times but was given the run-around.  About a year later a truck pulled up in front of his shop and dropped off the 5,000 books that had been used by the studio as set props. The studio sent him a check for the rental for 30 days.  After some phone calls, protesting that they owed him $250. per day for 365 days, the studios said “no way, we only needed them for 30 days.  Sorry that we forgot to send them back on time, go pound sand.”  Louie phoned his lawyer instead.  The attorney extracted the full amount from the Studio, a very substantial figure. Their lax business practice cost them nearly $100,000, big money in the 1940s.  When Louie called his attorney to collect the money, his lawyer refused to give it to him.  “If I give you this money, you’ll just spend it foolishly buying more books and having a good time.  So here’s the deal:  you go find a building to buy and I will release the money into escrow, that way at least you will have your own store.”  And that is how Louis Epstein ended up owning the building on Hollywood Blvd. that became the mighty Pickwick Bookshop.

Artisan's Patio today

Artisan’s Patio today

Epstein expanded Pickwick and in the 1970s opened shops in malls around Southern California.  He also bought the Artisan’s Patio for one of his sons to run.  This was a long, quaint alleyway to the east of Partridge, which is still in operation, filled with small business and craft shops. In the early 1970s it was the home to bookseller Fred Dorsett.  Pickwick’s expansion attracted the attention of B. Dalton, who was moving into the area, and wanted to add Pickwick to their chain.  Around the time B. Dalton took over Pickwick they decided to buy the property next door, which included the shop that Jim was operating out of.  When Jim got word that the building was for sale he went right to the landlord and bought it.  This was a master-stroke of business acumen, and in a short time, I believe it was only a couple years, he flipped it for a nice profit.  Jim closed his shop around 1976, actually selling the book shop to a guy who ran it into the ground in short order.  He then sold the building and retired. He was 42, and he began a new life of travel and uber frugality and “dumpster dipping” as he calls it.

B. Dalton’s Colossal Mistake

B.Dalton then made another colossal mistake.  They started changing Pickwick, in fact they ruined it, driving away most of the customers.  It was crazy, they took out the entire second floor of remainders and converted it to office space. In contrast, Epstein’s entire office was a desk in the middle of the first floor.  They also did not carry the eclectic mix that Epstein had so painstakingly built up over the years: books from small publishers, beautiful remainders from England, odd stuff that no one else had.  Epstein was a master bookseller.  He came up the hard way, and knew more in his little finger than B. Dalton’s entire army of executives.  They quickly ran his empire into the ground.  Old Epstein made a huge pile of money from the sale, enough to carry him and family for the rest of eternity if need be.

Frugalius Maximus Knew How To Cut Expenses

Jim was a clever investor, and made enough income to live, although he was frugal to the bone.  In all the years in his shop, he never had the usual “letterheads”, “invoices”, etc.  Business cards maybe, although I don’t have one in my possession. He would start screaming at the very idea of spending any money on such nonsense as office stationary.  A rubber stamp and some old envelopes, using the back side for notes and correspondence to the publishers.  “There’s plenty of paper around, just look through the dumpsters and you’ll find huge amounts you can use,” was his advice to aspiring book-sellers.

It was “Captain” Jack LeVan who gave Jim the nick-name “Frugalius Maximus“.  Jack Levan (died Jan 1, 2020) owned a book shop in Inglewood, Vajra Bookshop, that he kept open for some unknown reason, certainly not for that of income accumulation, as book buyers are scarce in that corner of Los Angeles. Additionally, his partner was a Tibetan silversmith, another odd twist, as the Tibetan book pricing system was something that startled many residents of the Inglewood area.  Nonetheless, Jack was the man who knew some of the truly world-class Jim Hubler frugality stories, like the Big Potato Heist.

The Big Potato Heist

Jim, for years living in a little cottage-like apartment in Santa Monica, which is actually the remaining half of an old motel wedged in between the modern condo behemoths that line the street,  had a daily routine.  Every morning he went for a walk and used the exercise to root through the hundreds of bins lining the alleys. Once in a while, carefully sifting some ephemera, he would hit a little jackpot.  One day, he found a nice coupon in the dumpster.  It was for 10 pounds of potatoes for 99 cents.  A good start anyway.  The coupon was good at a local independent market not far from Jim’s cruising range, so he dropped in during the busiest time of day.  This particular store was trying to lure in new customers by claiming a short wait time in the checkout line.  A sign was posted that if you waited in line more than three minutes they would give you a dollar.  Jim smiled his wicked smile.  This was like taking candy from a baby.  He grabbed the bag of potatoes and got in line, and then kept slithering backwards to the end of the line, until around three minutes had passed, some amount of time, but who was really keeping track anyway?

He then stormed up to the manager and said he had waited in line over three minutes and demanded the dollar.  The manager gave him a chit for the buck, and when he got to the checkout, he handed the chit to the cashier, along with the coupon for the 10 pounds of potatoes for 99 cents, and waited patiently while the clerk figured it all out, and handed him back a penny change, which Jim gratefully accepted.  Hah!  There were enough potatoes in the bag to last almost a month, and he gleefully recounted that the store had paid him a penny to take away 10 pounds of the big bombers.  There were about 20 potatoes in the bag, which meant that each one that he baked and ate cost him .0005 of a cent.  Now that’s frugal!

The Ex-Lax Bonanza

On another alley cruising day, Jim hit an unusual bonanza.  A bin with several packages of Ex-Lax laxative.  One of the packages was opened, but the others were sealed.  In with the packages was the receipt.  Someone, nobody knows who, was so constipated that he or she had grabbed a half-year’s supply of those yummy little chocolates.  Jim quickly realized that this could be quite a business opportunity for him.  He had no personal need for the laxative, he is mainly a vegetarian, thin as a rail, the only thing protruding is a thick walrus mustache.  Jim did his due diligence and research before making his move. He noticed that the package had a “money back” guarantee printed on it, promising a full refund “if not satisfied”.  Something like “no go….no pay.”

Jim checked all the local drug stores, and came across a price disparity.  The price that was printed on the receipt was a lower price than what some of the other stores in the same chain had on the product.  Jim quickly realized the arbitrage potential.  He carefully took one packet at a time back to one of the high priced drug emporiums, and received a full refund.  This became a big bonanza for Jim, because not only did he sell back the packets of Ex-Lax that he had found in the dumpster, but he began buying more packets at the low-priced store and selling them for refunds at the higher priced stores, the arbitrage being over a dollar a packet.  This went on for weeks until  the drug chain stabilized the prices.  They were also getting suspicious of this lanky old guy who would come in once or twice a week to return an Ex-Lax packet. “Why does this stupid old man keep buying Ex-Lax if the stuff doesn’t work?” they thought. Never in a thousand years did they ever dream they were being sharked by a brilliant business entrepreneur, one with too much time on his hands, but eager for even a small victory over one of the world’s largest drug pushers.

Don’t Bother With The Door Bell

Captain Jack and I would stop over to see Jim once in a while. The front of his cottage is packed with hundreds of small pots of cactus he has accumulated.  Jim was living cheap, for years he didn’t even have a phone.  Or a working doorbell.  No problem.  Jack explained that if one went to the door and knocked, Jim would not answer, suspicious of anyone who would approach after dark.  Jack knew Jim better than anyone on earth.  He had a simple way of attracting Jim’s attention.  Jack went to the front porch, took a quarter out of his pocket, and dropped it on the porch.  The sound of the 25 cent piece hitting the cement brought an immediate response, and Jim peered through the curtains to see who was dropping coin on his porch.  Jack told me later that in past times he  used a dime, but Jim’s hearing was not as good as it used to be, so Jack had to upgrade to a quarter, which made a louder noise as it hit the pavement.

The Second Refrigerator

Our pleasant conversations with Jim, who is opinionated to the max about everything, are certainly entertaining.  Recently we stopped by to see how he was doing. He is hobbling around with a walker due to a hip operation.  The big change is in the living room, where Jim has wedged in a second refrigerator that he got from someone who was evicted from one of the nearby units. Who says refrigerators have to be in the kitchen?  They can be anywhere you need them.  Having a second refrigerator can be a big plus in a small apartment, somewhere to stash a lot of odds and ends that somehow pop out of nowhere. Things you don’t really need, but are worth saving in case you might need them someday, so it’s nice to have a catch-all to keep them in, plus the flat top is great for pilling boxes and old copies of the L.A. Times.  Looking inside revealed some interesting items.  It’s packed with stuff, so upon opening the door a couple things fell out, one being an old tin sign that was advertising a restaurant – gas station off the old Highway 99.  It said something like “Eat Here and Get Gas.”

Peering in, I was fascinated to see two interesting looking mousetraps, a bag of hot chocolate mix, another bag containing some vintage rice, various cans of cleaners like End Dust, and a big old jar of “Flower of Sulpher”.  “That came from a guy who was an old pharmacist”, Jim cheerfully explained.  Jim abruptly shut the refer door on me, “OK, show’s over, I’m going to sleep.”  It was after 2 a.m.  We had been talking for over 3 hours.

As I drove Captain Jack back to his place in Inglewood, we reviewed the night’s conversation.  It was a challenge to follow Jim sometimes, because he goes off on so many tangents.  He might be talking about old Hollywood booksellers one minute, then all of a sudden he’s telling you about his trip to Africa, sleeping in his car off-road to save money, instead of staying in ritzy hotels.  It’s cool to be frugal.  But after having lived in a van for several years, a high-priced luxury hotel with a big screen TV and a hot shower sounds pretty good to me.