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Borders. B. Dalton. Waldenbooks. Encore. The list of shuttered bookstore chains is long, distinguished, and (if you read for pleasure) painful. But somehow, Barnes & Noble (NYSE: BKS) has endured — at least thus far.
But it hasn’t done much more than endure, and in the face of the e-commerce tidal wave, it has repeatedly looked for a buyer that might help shore up the company. Now it’s seeking one again, and in this segment from the Motley Fool Money podcast, host Chris Hill and Fool senior analysts Aaron Bush, Ron Gross, and Matt Argersinger talk about the possibilities.
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A full transcript follows the video.
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This video was recorded on Oct. 5, 2018.
Chris Hill: Shares of Barnes and Noble up 20% this week on the news that the iconic bookseller is putting itself up for sale. Ron, they’ve tried this two other times this decade. Do you think the third time’s the charm?
Ron Gross: [laughs] Third time’s the charm? Is that what you’re saying to me? Oh, we’ll see. Supposedly they’ve received interest from multiple parties, including chairman Leonard Riggio, who owns 19% of the stock. They think this is real. They put a shareholder rights plan in place, which is commonly known as a poisoned pill. If an unsolicited investor tries to take the company over, they can thwart that if they need to. It’ll be interesting to see, at a market cap of $500 million now after the pop, what is this thing worth and who would want it, especially in a situation where their online sales — again, the all-important online sales when you’re going up against somebody like Amazon — has been declining.
But they did do $100 million dollars of EBITDA and cash flow in the last year. You throw a 5-7X multiple on top of that, if you so choose to, and you can make money off of a purchase of a $500 million market cap. So, maybe folks see the ability to firm this up a bit. They’ve had five CEOs since 2013. They need to get things in order. But maybe there is some money to make here.
Matt Argersinger: Do we feel like books are back? I’m saying non-Kindle, non-e-books. Maybe it’s anecdotal, but I feel like I’ve seen more people who are in bookstores, buying physical books and enjoying that experience more than Kindle.
Hill: Yes, and part of that is a rise in independent bookstores, as well.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Aaron Bush owns shares of Amazon. Chris Hill owns shares of Amazon. Matthew Argersinger owns shares of Amazon. Ron Gross owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.