Thursday, March 24, 2016

Another Chapter for Barnes & Noble

Barnes & Noble, the once formidable book store chain, has been in survival mode for quite some time. The company recently reported its third quarter sales through January 31, 2016 and again showed a decline, this time by 1.8%.

While some may have believed that Barnes & Noble sales would jump following the liquidation of Borders Books back in 2011, when 511 Borders stores went out of business, Barnes & Noble was capable of generating only a modest gain of 1.9% in 2012. Surprisingly, this gain was entirely attributable to the NOOK device. Sales at its other two divisions, Barnes & Noble Retail and Barnes & Noble College, both declined that year. Since 2012, only the college bookstore division, now an independent company as a result of a spin-off, has been able to show growth.  Barnes & Noble Retail sales, which include both brick-and-mortar store and online sales, have declined every year. The same can be said of NOOK sales, which have tanked from $933 million in FY2012 to $264 million in FY2015. At the same time, the Barnes & Noble store count has declined every year since 2010, going from 720 locations to 640 units as of January 1, 2016.

While lower sales in the third quarter were reportedly related to lower online sales and store closings, there was a ray of hope: comparable sales registered a small increase over last year of 0.2% and, without the NOOK included, comps were up 1.3%. Comp sales had not shown a gain since 2012. There is also evidence to support improvement in sales at physical book stores in general. According to the Association of American Publishers (AAP), following years of sales decline, physical bookstores last year experienced a sales increase of 3.2% and a 4.1% increase in units sold. Furthermore this comes at a time when e-book sales overall have been experiencing a generally flat growth trend. It has even been reported that independent book stores are making a solid comeback.

This sign of stabilization in shopper activity at physical book stores may bode well for landlords who fear that B&N will suffer a fate similar to Borders. The trend has been encouraging enough that Barnes & Noble recently announced it will introduce a new store concept later this year, with four stores slated to open in 2017. Without any details, I would presume that the prototype will be substantially smaller than most existing units, which currently average 26,000 square feet. Nevertheless, Barnes & Noble is still deep in the woods, with no clear path to daylight just yet. And one major reason is that the 800-pound gorilla of retailing, Amazon, is beating its chest once again.

Amazon has continually applied pressure throughout its dominance of online retailing, and it’s now presenting what could be another major threat by opening its first physical retail location, a 7,500 square foot book store in Seattle, and announcing that a second unit is scheduled to open in San Diego. To rub Barnes & Noble’s face in the dirt even harder, the Seattle location is part of University Village, an upscale, open-air venue where a Barnes & Noble store closed in 2011.

Feedback on the Amazon Books store has thus far been mixed. The small-store format (relative to a typical Barnes & Noble location), for instance, limits inventory to just best sellers and books with top-rated customer reviews from the Amazon website. In order to find out whether a book is in stock, the customer has to ask; to find a price, the customer needs to use the Amazon app or in-store scanners. On the plus side, and most importantly, prices are just as cheap in-store as they are online. If Amazon is serious about developing a brick-and-mortar presence, it will likely need plenty of refinement along the way - but I doubt anyone would bet against them getting it right.

It’s likely that many readers here saw the press early last month about a statement by the CEO of General Growth indicating that Amazon would open 300 to 400 Amazon Books units, a quote that was quickly retracted. However, often where there’s smoke, there’s fire, and if Amazon Books shows reasonable success, when all is said and done, that misquote may not be all that far off the mark. For its own sake, struggling former book store giant Barnes & Noble better hope that it is.

Bob Sheehan, Vice President of Research


New Business: Property Management: The Property Management Team has added Chestnut Green at Woburn, Woburn, MA, to its portfolio. Chestnut Green is comprised of two 30,000 square foot office condominium buildings. New Leasing and Management assignment: Shaw’s Plaza, 700 Main Street, Sharon, Massachusetts. VP of Leasing Don Mace is handling leasing. New Leasing assignments:  341 South Broadway, a redevelopment opportunity in Salem, NH; and a 1,992 s/f space at The Mall at Lincoln Station, 145 Lincoln Road, Lincoln, MA Michael Branton is the leasing agent. Nashua Village, 590 Amherst Street, Nashua, NH. Don Mace is handling. New Employee: Paul Hovanesian will continue as Sr. Facilities Manager at the Greendale Mall in Worcester, MA, which the Property Management team recently added to its portfolio. Paul had held the same position with Simon.

National News

Retail sales dipped 0.1% in February, the Commerce Department said. Economists expected a 0.2% drop. Excluding autos and gasoline, sales increased 0.3%. Sales also fell 0.4% at department stores, 0.5% at furniture stores, 0.1% at electronics and appliance stores, and 0.2% online. Sales rose 0.9% at clothing stores, 1% at restaurants and bars, 1.2% at sporting goods stores, and 0.7% at health and personal care stores. Among retailers reporting monthly comp-store sales, L Brands was up 5.0%, Gap was down 2.0%, Rite Aid was down 0.8%, and Costco sales rose 2.0%. See our sales report below.

Accelerating News

L.L. Bean will open its first Michigan store at The Mall at Partridge Creek in Clinton Township this summer. Last month the retailer announced its first Rhode Island store, and now has 30 locations outside Maine...Aldi will make its CA debut this month with the opening of 8 Southland stores. Aldi plans to open approximately 45 stores in Southern CA by the end of 2016, part of a five-year strategic plan to open 650 new stores across the nation. By the end of 2018, the grocer expects to operate nearly 2,000 stores. Currently, Aldi operates nearly 1,500 US stores in 32 states...Macy’s will expand its off-price Macy’s Backstage format in 2016, opening one freestanding location and 15 in-store locations in traditional Macy’s stores. Macy’s will open 42 Bluemercury beauty stores, with 24 freestanding locations and 18 in-store shops in Macy’s stores. In addition, Macy’s will open a full-line store in Hawaii in 2016...Stein Mart plans to open 12 new stores this year, with 5 of those stores scheduled to open this spring. The spring store group includes the company’s first ever store in Delaware and a second store in Naples, Fl. Stein Mart has 278 locations from California to Massachusetts, as well as will open 14 new US stores this year. As of February, DSW operates 468 stores in 42 states...Pet Supplies Plus will target California as part of its growth plan for 2016. The pet franchise has more than 330 locations in 26 states...Sprint plans to open a further 500 US retail stores in partnership with British retailer Dixons Carphone. Sprint and Dixons will each put up half the costs and have a 50-50 ownership in the stores, which will operate under the Sprint brand. The deal is in addition to Sprint’s move to co-locate inside RadioShack stores...Barnes & Noble will open four new prototype stores in its current fiscal year. The first is expected to open sometime this summer. The company ended the year with 640 stores...AMC Theatres has agreed to purchase all outstanding shares of Carmike Cinemas Inc. for $30 per share in cash. The transaction, valued at approximately $1.1 billion, creates the largest chain of movie theaters in the US and the world. AMC currently has 5,426 screens at 387 theaters, located primarily in the US, including many in the nation’s top markets. Carmike has 2,954 screens at 276 theaters, primarily located in mid-size, non-urban communities. Together, AMC and Carmike will have well over 600 theater locations in 45 Inc. will reportedly open a second physical bookstore, at the Westfield UTC mall in San Diego, expected to open this summer...Dollar General plans to open 900 stores in 2016 and an even greater number in subsequent years. In 2015, Dollar General opened 730 new stores and remodeled or relocated 881 stores. The company ended its fiscal year with 12,483 stores...Dick’s Sporting Goods plans to open approximately 36 stores and relocate 9 others. It also expects to open approximately 9 Field & Stream stores and 2 Golf Galaxy stores in 2016. The company currently operates approximately 644 Dick’s stores, 73 Golf Galaxy stores and 19 Field & Stream stores...Pei Wei Fresh Kitchen opened its 200th unit at the end of last year and has since hit 222. In 2016 the company will open another 15-plus restaurants...Ulta Beauty opened 103 new stores last year, including 14 in the fourth quarter, to end the year with 874 locations. Ulta plans to open 100 new stores this year...Ahold shareholders approved a proposal to merge with Delhaize Group. Ahold is buying Delhaize for $11 billion in a deal that will create one of the largest food retailers on the US East Coast. Ahold operates Stop & Shop and Delhaize operates Hannaford and Food Lion. The combined company, Ahold Delhaize, will have more than 6,500 stores across the US and Europe. The transaction is on track for completion in mid-2016...Rita’s Italian Ice is testing a cafe concept in Albuquerque, New Mexico. Four additional Rita’s Cafe locations are in the works. In addition to Italian ices and frozen custard, the café features an expanded menu that includes freshly made donuts and an array of specialty beverages. The café concept will also be tested in Idaho, Minnesota, and California. Rita’s operates more than 600 locations around the globe...Ross Dress for Less opened 2 stores in Chicago this month, part of a 2016 expansion program totaling 70 new locations. Together, Ross Dress for Less and dd’s DISCOUNTS operate approximately 1,500 stores...SONIC Drive-In announced a new franchise agreement for Hawaii, the brand’s entrance in its 46th state. Franchisee group North Shore Provisions, LLC, plans to develop 7 SONIC Drive-Ins in Hawaii, with the first set to open on the island of Oahu in 2018. SONIC has 3,500 locations...Arby’s Restaurant Group, Inc. announced the signing of several franchise agreements for the development of 138 new restaurants. Arby’s expanded in 2015 with 61 new restaurant openings and 179 remodels, and has more than 3,300 restaurants worldwide...Online jeweler Blue Nile is set to open a store at Tysons Corner Center mall in Fairfax County, VA its first physical location outside of NYC, part of a strategy to open 4 locations this year.

Decelerating News

Office Depot will shutter about 50 US stores this year. Last year, the company closed 181 stores following the exit of 168 locations in 2014. As part of its buyout of Office Max in 2013, Office Depot said it would close at least 400 stores by the end of 2016. The closure of 50 stores this year will effectively bring Office Depot to its goal...Sports Authority has filed for Chapter 11 bankruptcy in US Bankruptcy Court in Delaware, hoping to reorganize its operations and reduce its $1.1 billion debt. The filing was expected. The company has marked two distribution centers and 140 of its 464 stores for closure in the coming months. The court still must approve store-closing sales...Stage Stores will close 30 of its 832 units...Hometown Buffet and its affiliated concepts including Old Country Buffet, Ryan’s, Fire Mountain and Tahoe Joe’s have filed for Chapter 11 bankruptcy protection. The restaurant is owned by Ovation Brands, which closed 74 locations in February. The brand operates 328 restaurants in 35 states, employing 17,000.The chains filed for Chapter 11 in 2008, downsizing from 626 locations, and again filed in 2012, cutting 494 restaurants...Tailored Brands, formerly known as Men’s Wearhouse, plans to close roughly 250 stores this year, including 80 or 90 full-price Jos A. Bank stores, all Jos. A. Bank and Men’s Wearhouse outlet stores, and 100 to 110 tuxedo shops.

New England News

Flank, a 240-seat steakhouse, opened in the 1265 Main development in Waltham last month. The restaurant spans 7,300 s/f and includes a 130-seat dining room, a 24-seat bar, 50-seat lounge and a 50-seat year-round patio...Tasty Burger has opened a 5th location at 2200 Washington St. The chain got its start in Boston’s Fenway and has since expanded to Harvard Square, L Street in South Boston, and 145 Dartmouth St. in the Back Bay...Aldi is extending its Massachusetts reach with a location in Plymouth, set to open this summer. Aldi has 10 existing stores in the Bay State. The Plymouth location will be located in Colony Place in Plymouth. Aldi US operates close to 1,500 stores in 32 states and plans to have 2,000 stores open by the end of 2018. ..Demolition has begun of Circle Cinema movie theatre, a long-time fixture in Brookline. The site will eventually be home to 92 luxury senior housing units, a 162-room hotel and 14,000 s/f of retail... Lowell General Hospital plans to open a Circle Health Urgent Care facility at Treble Cove Plaza in Billerica. The site, opening this fall, will include urgent care and some additional services...Dairy Queen will nearly double its presence in Massachusetts and open its first stores in Vermont. The chain currently operates 33 Bay State locations, and will add 60 more in the next five years. There are currently 6,700 Dairy Queen locations worldwide.


Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0. 


Last month, retail sales fell 0.1% from January, to $447.3 billion, the Commerce Department said, in line with what economists surveyed by FactSet had predicted. January retail sales were revised to a decline of 0.4%, instead of the previously reported growth of 0.2%.

Source: U.S. Department of Commerce -


Treasury Yield Sources:;


The Conference Board Consumer Confidence Index®, which had increased moderately in January, declined in February. The Index now stands at 92.2 (1985=100), down from 97.8 in January. The Present Situation Index declined from 116.6 to 112.1, while the Expectations Index decreased from 85.3 to 78.9 in February.

Source: The Conference Board -


Manufacturing contracted in February as the PMI® registered 49.5 percent, an increase of 1.3 percentage points from the January reading of 48.2 percent, indicating contraction in manufacturing for the fifth consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business -