Barnes & Noble CEO James Daunt on Reviving an Iconic Brand

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1:39Carol Massar:Bloomberg Audio Studios, podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. James Don is CEO of Barnes & Noble. He's managing director of Waterstones Bookstores in the UK. He's founder and owner of the independent bookstore chain Daunt Books, too. He joins us here in the Bloomberg Interactive Brokers Studio. Welcome. Thank you for having me. So it's a private company now, so we don't get all the numbers that we get. But right before it was taken private, Barnes & Noble had a loss of$125.5 million on revenues of$3.7 billion.

2:16That was for the fiscal year that ended April of 2018. Same store sales were down more than 5%. What are some metrics you can give us right now that speak to the health of the company? Well, I think generally the book market has rebounded. So it's not just us, though it is definitely us along with books. And COVID was a difficult time for us. Obviously, a lot of our stores were closed, but people rediscovered reading. But also, I think always bookstores are great places in which all ages, all types, but particularly young people, like to gather and like to read. And I think we run our bookstores better, I like to say.

2:51But I think also the independents are opening up great stores around. And people are discovering the pleasures of a physical bookstore. And we're benefiting.

2:59Carol Massar:I love that you go, why do you think it's come back? Because it used to be just lovely little bookstores in towns and cities. And then, of course, the big guys came in. And there was always the tug of war between the big and the small. I think there was an old Tom Hanks, Meg Ryan movie about this, right? There was a cute little movie. Yeah, you've got mail. You've got mail. Okay. And then it just felt like it was really bad for the selling of books. Amazon came on the marketplace. And now I, too, have seen a resurgence of little bookstores. What do you think that is? Well, Amazon is why people lost confidence and then the rise of Kindle.

3:32And there was a general notion and a media sense that physical books will go on. Reading was disappearing. And I think collectively, including the big chains and the small guys, a lot of people lost their way. And then we got ourselves sorted out, and the good independents have sorted themselves out, and we're all now running much nicer stores, and people are back and have embraced us. Now, the independents who did not lose their confidence, they wouldn't have even noticed the trials and tribulations that the rest of us went through. So what is it about the experience inside a bookstore? And we're not just talking Barnes & Noble here because you have experience at Daunt Books.

4:08You're also managing director of Waterstones Bookstores in the UK. what is the experience that you try to create inside a bookstore that makes it so people don't order them online or download them on an e-reader? I think the great independent bookstores have that magic of curation, which is selecting the titles they have, matching those to the community in which they sit, and having a really nice physical space and a welcoming and vibrant one. What we as a chain bookstore now need to do and have done is abandon all of the consistency and operational disciplines of a chain bookstore and hand power to our individual store teams and allow them to replicate that independent.

4:51So essentially you're trying to create a community bookstore within every Barnes & Noble location. And that has worked dramatically well in many, better generally in most, and not so well in some. Where has it not worked and why? Where the teams don't quite understand or don't have the skill set or where we haven't built up the experience. Because book selling is a trade, it's a vocational trade, and the skills that are attached to that have to be learned and developed. So we haven't completed that journey, I would say. But in most of our stores, they're a lot better than they ever were. And some of them are really fantastic.

5:24Carol Massar:So James, when it comes to the Barnes & Noble, does that mean there are certain things when you walk in that are going to be consistent, whatever Barnes and Noble you come in and then there's going to be certain nuances to the community and the environment or what how do you how do you kind of hand over well the consistent thing is they're full of books and they are bookstores but we and because there are books obviously that are bestsellers and books that people want and you know everybody has to have catcher in the rye because every bookstore does independent or thing but we leave it entirely up then we give them no constraints, no budget constraints, no visual constraints.

6:00We just say use common sense and make it the best possible bookstore you can. And generally, they get on with that dramatically better than when they were given very strict rules to do it in precisely the same way everywhere. I want to know about how your role works. It's not every day we speak to the CEO of a large company that has two other jobs as well. So as I mentioned, you're CEO of Barnes & Noble, you're managing director of Waterstones Bookstores, you're the founder and owner of the independent bookstore chain, Daunt Books. How does that relationship work just in your professional life?

6:30How are you the CEO of Barnes & Noble, but also the managing director of these other stores? I think the only professional advantage I have is I really do understand how to run a really good bookstore because I ran one myself for 20 plus years longer and continue in a sense to do so. So I understand what my teams need, what my stores need. And then my job is to just make sure from a central perspective that we don't get in their way and that we provide what they require to run a really good bookstore. And what they generally require is, frankly, money. They need clean carpets and they need their HVAC fixed and they need books to turn up on time when they order them.

7:05But I don't tell them what to order and I don't get in their way. And that allows me to do the job reasonably well. And frankly, the less I do now, the better it goes.

7:14Carol Massar:Are people as interested in reading classics and old-time books that were just very popular years ago. I'm just curious about, like, what is it that people are buying? Well, there was a, you mentioned BookTok earlier. BookTok coming out of COVID was exploded with a love of classics. Everyone was reading Middlemarch and Jane Austen. And that was hugely exciting and continues still. But at the same time, you know, the roving eye, because, you know, kids want to read the same thing because they want to talk about books and engage. And at the moment, it's romanticity and it's relatively spicy romantic-y.

7:51But at the same time, you know, they're reading the great books as well. Books are only part of what Barnes & Noble sells. What else do you use to get people in the door and get them walking out, parting with money? Well, we have sort of become really the last place in which quite a lot of these sort of dying categories actually have rejuvenated. So we have a fantastic music business, vinyl, even DVDs, CDs. There's been an increase in sales of those, We have a fantastic newsstand offer. And now we do toys and games, board games, and the rest really properly. Again, aiming for those to be educational, to support effectively the intellectual engagement that you have around books.

8:31And therefore, they sit, we believe, naturally alongside books. And that's our job. We call it related product. We have to keep them tightly tied into a love of learning and development, which is encapsulated by books.

8:44Carol Massar:We're talking about James Dodd. He's the CEO of Barnes & Noble. He's also managing director of Waterstones Bookstores in the UK, founder and owner of the independent bookstore chain, Don Books. He's here in our Bloomberg Interactive Broker Studio. James, what about like live events for doing stuff? Like I've done some things at local bookstores, you know, a Q &A chat with someone on a new book. But I'm just curious, how do you kind of think about that, whether it's in your own bookstores, but also for Barnes & Noble, making it a place where people go to meet up? I think we are social spaces and that can, at its sort of modest level, that can be the story time a bookseller has to learn how to read a book upside down to three and four year olds, all the way to obviously being the interaction between authors and readers.

9:26And so holding talks, events, question and answer, interviews, all of the myriad of ways in which you can make a bookstore an exciting place in which to come. It's easier to do in the metropolitan cities because you can get the great authors, but you can do it wherever you are on a more modest scale. I mentioned same-store sales back in April of 2018 were down more than 5%. Can you tell us same-store sales, are they positive now? Yeah, the book market has been going up. So, I mean, there are plenty of publishers whose public numbers will show you that. There's been a huge boom since COVID. And generally, the publishers have been doing very well.

10:01And we're in that market and we're doing very well. And when you have an increasing store count, and we are now over 700 stores, in fact, we were below 600 a short while ago, then you're going to sell an awful lot more. The Wall Street Journal reported a possible IPO as early as the second half of this year. Is that still the plan? Well, luckily, that is above my pay grade. It would affect you. It will affect me, but I don't own the place. Sad as that may be. Do you think you would stay on as CEO? I enjoy what I do, and I have a feel that what we do, and the people who work for me are hugely vocationally motivated.

10:38We're not as important as public libraries by any close measure, but what we do, we do do with an immense respect for the power of books, and I think all of us, including myself, hope to continue to do that better.

10:51Carol Massar:I think it's interesting you brought up libraries, because I do feel like there's less and less funding for libraries in different towns. I know growing up that that was a big deal. You get your library card, you go to the library. That was a big deal. But is some of that also maybe fueling where people just have to go buy their own books, especially for kids? I don't think that's to our benefit. I think it's only to the detriment generally of reading and generally for the engagement with books. And I speak actually as an Englishman and what's happened in the United Kingdom where public libraries have not been funded for really a decade and more.

11:22And it's hugely to the detriment of society. AI and books. This is wild. I mean, this has been happening for a few years, but if a big news event happens, you can go find a self-published AI written book on Amazon to download right away. Are you going to carry AI books? We generally don't, and we go to very great efforts to exclude them from our online operation. It's a challenge, I bet. It is a big challenge. But actually, AI is absolutely fantastic at hunting out AI. So that's helpful. But in and of itself, as long as AI is clearly communicated that a book is created by AI, and if readers want to read it, then we should provide that.

12:05That's our role in life. And so I'm not an evangelist who's saying, no, never AI. But I am saying it should be very clearly indicated whether it is a real author, to whom, by the way, as booksellers, we feel huge duty of care, or if it's AI.

12:20Carol Massar:How big is AI category when it comes to books now in your stores? Nothing. Nothing. I mean, not nothing, nothing, but as far as we can possibly determine, it's nothing. I like that. Me too. That makes me happy.

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