New York City In a memo to company associates on Oct. 29, Leonard Riggio, chairman of Barnes & Noble, warned that the economic outlook is grim, the holiday season will likely be terrible for the bookseller, and there is no indication that things will improve soon.
The Wall Street Journal posted a copy of the memo on Monday. In it, Riggio stated: “Never in all of the years I've been in business have I seen a worse outlook for the economy. And never in all my years as a bookseller have I seen a retail climate as poor as the one we are in. Nothing even close.
“The latest bubble in our system has burst, this time taking with it the hopes and dreams of tens of millions of Americans, and leaving many more in fear of their now uncertain futures. Worse, the full extent of the potential damage is still not known as this confluence of financial disasters has no precedent in our nation's history. Moreover, uncertainty itself can lead to more damage in the system, and thereby help accelerate the downward slide. Alas, we live in a consumer-driven economy: the paradox being that if we don't spend, we go broke.”
Although he predicted many retail leaders will be forced to close, he assured associates that Barnes & Noble will not be one of those. Instead, he pointed to the company’s strong performance metrics such as overall company profitability, excellent standing with the banking community, and positive cash flow. “Even with this year's large sales shortfall, we will make a decent profit, and end the year without owing a penny to our banks,” he noted.
However, Riggio conceded that, “Barnes & Noble, too, has suffered from this crisis, albeit not as severely as most retailers, and certainly not as much as other booksellers. As you know, our comparable store sales have declined for the first time in our history. As a result, we are bracing for a terrible holiday season, and expect the trend to continue well into 2009, and perhaps beyond.”
Although the company does not plan to make “Draconian cuts in capital spending,” Riggio said new store openings would be curtailed greatly in 2009, but he did not quote a number. In the company’s second-quarter report, planned store openings for 2009 dropped from an earlier prediction of 25 new locations to 20.
On a positive note, Barnes & Noble announced Tuesday that it had signed a lease to open a new bookstore in Elk Grove, Calif., in June of 2010.
Additionally, Riggio assured associates in his memo that “Unlike some of our competitors, we will not drop our contributions to the 401K plan, not stop overtime pay for holidays, and will not change the composition of our excellent benefits package.”