Oh, hey, it’s the story that doesn’t end. But if you haven’t been keeping up with the drama surrounding Barnes & Noble, buckle up. This situation just keeps getting worse.
Regular readers of this column know that Barnes & Noble is in a precarious situation right now. How bad it is is debatable. Some experts think that a capable leader can reverse its continually-slumping sales while others think its demise is inevitable. Who’s right, we’ll have to wait and see. But Barnes & Noble could have been set on a very different trajectory this summer.
Another CEO Hunt
Barnes & Noble hasn’t had solid leadership for some time. So it shouldn’t have been too much of a surprise when they fired yet another CEO back in July. That means they’ll be on their sixth one in the past six years. You can read a brief summary of Barnes & Noble’s past five years here.
Photo illustration: PW; photos: Barnes & Noble
The founder and chairman, Leonard Riggio, has once again assumed leadership duties, and the chain won’t really start looking for its next leader until next year, at least six months after Demos Parneros’ departure. They haven’t even chosen anyone to lead the search for a CEO. Riggio says he’s getting “conflicting advice” about who to hire as CEO, some advocating for a person with book and/or retail experience while others say to find someone who will focus on the brand itself; according to him, hiring from within isn’t an option.
Parneros came to Barnes & Noble from Staples, and he worked as an executive for about five months before his promotion.
So why was he let go so suddenly? That’s where it gets interesting. Barnes & Noble claimed Parneros was fired for unspecified “violations of the Company’s policies” but that it had nothing to do with fraud. The following month, Parneros filed a lawsuit claiming he was unjustly fired and had been defamed. Barnes & Noble fired back that he had sexually harassed and bullied employees, a claim Parneros denies and says now makes him unable to be hired. The case is still in the early stages, but it sounds like it could be headed to trial.
Also at the center of both cases was the potential sale of the chain. Barnes & Noble claims that Parneros “sabotaged” the sale, while he argues that Riggio is just angry the deal fell apart and is the one who is the problem.
The Mysterious Buyer
No one knew who the mysterious buyer was, but the most likely candidate was Indigo, the Canadian bookstore chain. Although they have opened their first US store in New Jersey, acquiring Barnes & Noble would make them the biggest bookstore chain in both Canada and the US.
But it turns out that line of thought was wrong. It was actually a British retailer, WHSmith, who wanted to buy Barnes & Noble.
By all accounts, a deal was very close or actually struck, but Parneros and Barnes & Noble disagree about why the sale didn’t happen. The ex-CEO said WHSmith withdrew its offer after doing “due diligence”, but the chain says Parneros was very negative about the store, saying it has “no realistic prospects for success” and was an “ugly mess”.
So, if you’re anything like me, you had never heard of WHSmith before. According to Retail Dive:
“WHSmith differs from Barnes & Noble in many ways, the most obvious being that it actually doesn’t sell all that many books when you consider its total assortment. Similarly to book chains like Canada’s Indigo Books and Music and France’s FNAC, WHSmith has moved beyond its core as a print bookseller into the higher priced consumer electronics category.”
In fact, many of its locations are in places like hospitals and transportation stations, places where customers may have a need for something to read right now. Some stores even has post offices inside them.
While we may never know how much WHSmith was willing to pay, Barnes & Noble says they raised their initial offer. The chain still is looking at a possible sale though. Analysts say the chain is currently valued around $400 million, and Riggio’s company is a potential buyer.
Unsteady at the Top
Over the coming months, we’ll probably learn more about the potential sale to WHSmith. There will be even more fingerpointing; meanwhile, Barnes & Noble will have to juggle with hiring a new CEO and potentially acquiring new owners. That’s a lot of changes and financial investments at a time when competitors like Amazon are muscling in on their territory. Perhaps another chain will step up to match or beat WHSmith’s offer, but I imagine that will depend on Barnes & Noble’s holiday sales. Considering Barnes & Noble has just lost another $17 million in the last quarter and has decreased sales for the past five years, it’s hardly a safe bet.
I’m going to guess Riggio does still want to be tied to Barnes & Noble. I’m sure he has much pride in and emotional attachment to the company (and, it seems, wants to leave on a high note), but he either should follow through with his retirement or get back control. This stepping in for a few months in-between CEOs isn’t doing anyone any good, and he’s getting some pressure from publishers and others in the industry as well. Ironic considering that he was once pressuring on book companies and independent booksellers.
If Parneros did or said any of those things, then of course he should have been removed. A company can’t help it if an executive jump ships, but if several CEOs are being forced out, chances are that either the company has unrealistic expectations or they are terrible at hiring. And when hiring from within isn’t an option? That’s demoralizing for the entire company. I’m not saying that a stocker from a random store should take up the reins, but there’s no one who has been at Barnes & Noble long-term to be promoted? Someone with a good, long-term vision?
But you can’t have a good, long-term vision if you don’t have a good, long-term CEO.