1 00:00:02,240 --> 00:00:05,640 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,680 --> 00:00:08,760 Speaker 1: dot Com, the Radio plus Mobile Act and on your radio. 3 00:00:09,039 --> 00:00:13,320 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters. 4 00:00:13,360 --> 00:00:17,000 Speaker 1: I'm Charlie Pellett, fed Metted Wednesday. We've got stocks fluctuating 5 00:00:17,040 --> 00:00:19,040 Speaker 1: now trading lower in this update brought to you by 6 00:00:19,200 --> 00:00:22,840 Speaker 1: Instinct Equities from Bank of America Mary Lynch. Your access 7 00:00:22,880 --> 00:00:28,760 Speaker 1: to informed insights, market color and unique liquidity Instinct Equities. 8 00:00:28,880 --> 00:00:31,520 Speaker 1: That's the power of global connections. Now let's head right 9 00:00:31,560 --> 00:00:34,159 Speaker 1: over to the first Word Breaking news desk for today's 10 00:00:34,200 --> 00:00:37,120 Speaker 1: afternoon call. Here he is one and only Bill Maloney. 11 00:00:37,479 --> 00:00:40,960 Speaker 1: A good afternoon, Charlie Maybeways averages are quiet today, with 12 00:00:41,000 --> 00:00:44,120 Speaker 1: the down currently down four points. SUPs are a little change, 13 00:00:44,159 --> 00:00:46,640 Speaker 1: the NAZAC falls nine and a half, the small cap 14 00:00:46,680 --> 00:00:49,239 Speaker 1: six hundred is down three points, and the US tenn 15 00:00:49,360 --> 00:00:52,920 Speaker 1: yield at one point five six out of tenness be 16 00:00:53,040 --> 00:00:57,440 Speaker 1: sectors are higher, let by gains and utilities, Financials and consumers, Staples, 17 00:00:57,680 --> 00:01:02,320 Speaker 1: consumer discretionary and telecom led to the downside down. Transports 18 00:01:02,400 --> 00:01:04,640 Speaker 1: rise twelve points and as a by texts fall five. 19 00:01:05,080 --> 00:01:08,119 Speaker 1: Utilities gained eight and the VIX is down by one 20 00:01:08,160 --> 00:01:12,240 Speaker 1: point four percent. Down leaders included three M, DuPont and Fiser, 21 00:01:12,480 --> 00:01:16,520 Speaker 1: while Cisco, McDonald's and Intel led to the downside. In 22 00:01:16,560 --> 00:01:20,000 Speaker 1: the retail space, Staples, Target, and Low's all fell after 23 00:01:20,040 --> 00:01:23,480 Speaker 1: their results, while Urban Outfitters stored as much as nineteen 24 00:01:23,600 --> 00:01:26,720 Speaker 1: percent after its earnings after the belt Tonight look for 25 00:01:26,720 --> 00:01:30,560 Speaker 1: earnings from Cisco. Estimates are for sixty cents on revenues 26 00:01:30,560 --> 00:01:33,320 Speaker 1: of twelve point five seven billion. Live from the First 27 00:01:33,440 --> 00:01:35,600 Speaker 1: Breaking News desk on Bill Maloney, Charlotte, all right, thank 28 00:01:35,600 --> 00:01:38,280 Speaker 1: you very much, Bill Maloney, and to hear live breaking 29 00:01:38,280 --> 00:01:42,280 Speaker 1: news over your bloombread tip squawk squ a w K 30 00:01:42,640 --> 00:01:45,880 Speaker 1: on your terminal. I'm Charlie Pellett. That's a bloom Bread 31 00:01:45,920 --> 00:01:50,720 Speaker 1: business flash. You're listening to Taking stock with Kathleen Hayes 32 00:01:50,800 --> 00:01:55,000 Speaker 1: and Pim Fox on Bloomberg Radio. Another chapter for Barnes 33 00:01:55,040 --> 00:01:58,040 Speaker 1: and Noble. Well, it's beginning with a stock decline of 34 00:01:58,160 --> 00:02:04,280 Speaker 1: nearly twelve percent to day after its CEO, Ron War 35 00:02:04,760 --> 00:02:08,200 Speaker 1: was ousted. Apparently he's not the right person to revample 36 00:02:08,240 --> 00:02:12,120 Speaker 1: bookstore chain obviously struggling to compete with Amazon and other 37 00:02:12,280 --> 00:02:15,079 Speaker 1: online sellers. For anybody, though, who likes going into those 38 00:02:15,080 --> 00:02:16,520 Speaker 1: big Barnes and Nobles and then in a cup of 39 00:02:16,520 --> 00:02:20,280 Speaker 1: coffee looking at books. This is kind of a dark cloud. 40 00:02:20,440 --> 00:02:23,120 Speaker 1: Matt Townsend is here retail reporter for Bloomberg News, and 41 00:02:23,160 --> 00:02:27,040 Speaker 1: he's been taking a look at this today. So you know, 42 00:02:27,160 --> 00:02:29,560 Speaker 1: the CEO Austre is one thing, and then these there's 43 00:02:29,560 --> 00:02:31,799 Speaker 1: these big forces that are pushing against Barnes and Noble. 44 00:02:31,800 --> 00:02:33,600 Speaker 1: But let's start with the CEO. What happened, Well, he 45 00:02:33,680 --> 00:02:36,639 Speaker 1: was there barely over a year, and you know, when 46 00:02:36,680 --> 00:02:38,480 Speaker 1: he was hired, he was seen as a guy who 47 00:02:38,520 --> 00:02:41,040 Speaker 1: had a ton of experienced retail He worked for Toys 48 00:02:41,120 --> 00:02:44,720 Speaker 1: r US, Best Buy, UM, and his big idea was, 49 00:02:45,440 --> 00:02:48,760 Speaker 1: you know, books much very competitive market. So we're gonna 50 00:02:48,880 --> 00:02:52,760 Speaker 1: put more non book things in Barnes and Noble, more toys, 51 00:02:52,880 --> 00:02:57,840 Speaker 1: more accessories, gifts. UM. They recently announced that they were 52 00:02:57,880 --> 00:02:59,920 Speaker 1: gonna start testing putting beer and wine in their store, 53 00:03:00,080 --> 00:03:01,960 Speaker 1: which for a lot of people made a lot of 54 00:03:01,960 --> 00:03:04,639 Speaker 1: sense because that goes well with reading books and their 55 00:03:04,639 --> 00:03:07,799 Speaker 1: cafes and things like that. UM. So we don't really 56 00:03:07,800 --> 00:03:10,560 Speaker 1: know behind the scenes why he was actually asked to. 57 00:03:10,600 --> 00:03:14,080 Speaker 1: The results have been mixed. UM. You know, it's not 58 00:03:14,160 --> 00:03:17,959 Speaker 1: drastic declines right now in the business, they've kind of stabilized. Um. 59 00:03:18,040 --> 00:03:19,839 Speaker 1: But at the end of the day, this is still 60 00:03:19,919 --> 00:03:22,560 Speaker 1: Len Riggio's company. He founded it over fifty years ago. 61 00:03:22,639 --> 00:03:25,760 Speaker 1: He's still the chairman. He was set to retire in September, 62 00:03:26,000 --> 00:03:27,520 Speaker 1: kind of walk away and just be a board member. 63 00:03:27,520 --> 00:03:30,359 Speaker 1: No longer chairman. He is now staying, going to find 64 00:03:30,400 --> 00:03:32,280 Speaker 1: a new CEO and run the company while they look 65 00:03:32,320 --> 00:03:35,840 Speaker 1: for the next CEO. Is this really a bookstore company 66 00:03:35,920 --> 00:03:38,320 Speaker 1: or is this a real estate business that happens to 67 00:03:38,360 --> 00:03:41,000 Speaker 1: sell books and whatever else they can sell in those 68 00:03:41,120 --> 00:03:45,560 Speaker 1: large square foot print you know, I mean it's it's 69 00:03:45,600 --> 00:03:48,960 Speaker 1: it's definitely shifting away from a bookstore that they have 70 00:03:49,080 --> 00:03:51,240 Speaker 1: to and that's they're deversifying. As far as the real 71 00:03:51,360 --> 00:03:53,320 Speaker 1: estate of me, I believe most of their stores are 72 00:03:53,320 --> 00:03:55,560 Speaker 1: just leased. UM. So it's not that they own a 73 00:03:55,560 --> 00:03:57,760 Speaker 1: bunch of real estate that's worth a lot of money. 74 00:03:57,800 --> 00:03:59,960 Speaker 1: They gonna let the releases roll off. That's what they've 75 00:04:00,000 --> 00:04:03,040 Speaker 1: into doing. That's what they've been doing. They've been UM. 76 00:04:03,760 --> 00:04:06,000 Speaker 1: When at least comes up, they either get out of 77 00:04:06,040 --> 00:04:09,040 Speaker 1: it or they renegotiate it. UM. But I will say, 78 00:04:09,240 --> 00:04:11,200 Speaker 1: you know one thing, going for Barnes and Noble is 79 00:04:11,240 --> 00:04:13,840 Speaker 1: that the publishing industry does not want to see Barnes 80 00:04:13,840 --> 00:04:15,520 Speaker 1: and Noble go away because then they'd be left with 81 00:04:15,600 --> 00:04:19,640 Speaker 1: dling with just Amazon, which is not a good thing 82 00:04:19,720 --> 00:04:22,560 Speaker 1: for them having the publishers. So the publishers will probably 83 00:04:22,960 --> 00:04:24,920 Speaker 1: and then mall owners like Barnes and Noble too, because 84 00:04:24,920 --> 00:04:26,720 Speaker 1: it draws a lot of foot traffic, even if no 85 00:04:26,760 --> 00:04:28,719 Speaker 1: people aren't always buying books when they go in the stores. 86 00:04:29,160 --> 00:04:31,800 Speaker 1: So are reasons why Barnes and Noble probably has a 87 00:04:31,880 --> 00:04:34,760 Speaker 1: much longer life than maybe some other retailers because publishers, 88 00:04:34,760 --> 00:04:37,520 Speaker 1: publishers want to keep them in business, and the malls 89 00:04:37,520 --> 00:04:40,200 Speaker 1: way I like them. Okay, Bloomberg News, your team reporting 90 00:04:40,440 --> 00:04:44,360 Speaker 1: that you're you're reminding us that Amazon's testing physical bookstores 91 00:04:44,360 --> 00:04:48,159 Speaker 1: could ultimately open hundreds of them. So obviously, if Amazon 92 00:04:48,400 --> 00:04:51,640 Speaker 1: is thinking of doing this, it's not like there's something 93 00:04:51,839 --> 00:04:54,280 Speaker 1: just totally oh you're there's there's no reason to be 94 00:04:54,320 --> 00:04:56,240 Speaker 1: a brick and mortar bookstore, and Barnes and Noble has 95 00:04:56,279 --> 00:05:00,919 Speaker 1: the brand Barnes and Noble's. Um. What Amazon does with 96 00:05:00,920 --> 00:05:04,400 Speaker 1: a physical location would probably incorporate, you know, places to 97 00:05:04,640 --> 00:05:06,560 Speaker 1: a place to pick up your packages and stuff like that, 98 00:05:06,640 --> 00:05:08,880 Speaker 1: so it would be, you know, it's branding, it's they 99 00:05:08,920 --> 00:05:11,880 Speaker 1: could sell all their you know, their their their tablets 100 00:05:11,920 --> 00:05:14,480 Speaker 1: and things like that. But that's true. I mean, you know, 101 00:05:14,960 --> 00:05:18,160 Speaker 1: the books have taken away some of the market share 102 00:05:18,160 --> 00:05:22,039 Speaker 1: for physical books, but the books have kind of plateau there. 103 00:05:22,040 --> 00:05:26,760 Speaker 1: They're the market roughly, so people are still reading a 104 00:05:26,760 --> 00:05:29,599 Speaker 1: lot of physical books. Um. I mean, one really strong 105 00:05:29,640 --> 00:05:32,000 Speaker 1: part of the book market that hasn't been taken over 106 00:05:32,040 --> 00:05:34,440 Speaker 1: at all by the books is children's books, for example, 107 00:05:34,520 --> 00:05:37,800 Speaker 1: and Barnes and Noble even before Ron Barr got there, 108 00:05:37,839 --> 00:05:40,159 Speaker 1: I had made a push to put more children's books 109 00:05:40,160 --> 00:05:42,760 Speaker 1: in their stores, may put more places for kids to read, 110 00:05:43,640 --> 00:05:47,640 Speaker 1: kind of like a sort of pseudo library. The stock 111 00:05:47,760 --> 00:05:50,680 Speaker 1: is down more than right right when I took a 112 00:05:50,720 --> 00:05:54,000 Speaker 1: look at the the release the earnings released, you're talking 113 00:05:54,040 --> 00:05:59,360 Speaker 1: about a retail sales decline of more than two percent. 114 00:06:00,120 --> 00:06:05,040 Speaker 1: You look at the nook sales division that's down. At 115 00:06:05,080 --> 00:06:08,240 Speaker 1: what point does this become a business that is just 116 00:06:08,320 --> 00:06:11,000 Speaker 1: about saving the jobs of the twenty eight thousand people 117 00:06:11,000 --> 00:06:14,680 Speaker 1: that work there rather than about growing the business. Can 118 00:06:14,680 --> 00:06:18,840 Speaker 1: this go on? And definitely, I mean that that's basically 119 00:06:18,920 --> 00:06:21,720 Speaker 1: the conundrum with every brick and water sort of traditional 120 00:06:21,800 --> 00:06:24,560 Speaker 1: retailer out there, it's how do you manage a slow decline. 121 00:06:25,000 --> 00:06:27,159 Speaker 1: There's a lot of growth out there for any retailer 122 00:06:27,880 --> 00:06:32,000 Speaker 1: that has fiscal stores nationwide. So with Barnes and Noble, yeah, 123 00:06:32,000 --> 00:06:35,359 Speaker 1: that is you're managing to decline. Um. You know, they 124 00:06:35,560 --> 00:06:38,000 Speaker 1: made this big push into digital books with the Nook 125 00:06:38,040 --> 00:06:39,920 Speaker 1: and had these Nook tablets and for a while they 126 00:06:39,920 --> 00:06:42,000 Speaker 1: were okay and did pretty well, but eventually they got 127 00:06:42,080 --> 00:06:48,000 Speaker 1: crushed by Amazon and iPads and everything else. So it's 128 00:06:48,120 --> 00:06:50,479 Speaker 1: much diminished business as far as that. But yes, no, 129 00:06:50,560 --> 00:06:52,599 Speaker 1: I think a big part of this is how do 130 00:06:52,640 --> 00:06:54,839 Speaker 1: you manage a declining business and how do you sort 131 00:06:54,880 --> 00:06:57,640 Speaker 1: of stabilize it getting back to a growth business. I 132 00:06:57,640 --> 00:06:59,120 Speaker 1: mean that seems out of the question. Of course, part 133 00:06:59,120 --> 00:07:01,560 Speaker 1: of the backdrop has been in some weak retail segments. 134 00:07:01,600 --> 00:07:03,440 Speaker 1: It's not just Barnes and Noble when you look at 135 00:07:03,480 --> 00:07:07,560 Speaker 1: the consumer but quickly, uh analysts of what are they 136 00:07:07,600 --> 00:07:09,400 Speaker 1: saying about barn Is there anybody out there saying, oh, 137 00:07:09,400 --> 00:07:12,520 Speaker 1: it's beaten up by it? Um? I haven't seen that, 138 00:07:12,640 --> 00:07:15,640 Speaker 1: but you know, if the stock is every and when 139 00:07:15,640 --> 00:07:17,800 Speaker 1: the soccer is selling them when someone's buying it obviously. 140 00:07:17,880 --> 00:07:21,000 Speaker 1: So UM, you know it's it's still has positive cash flow, 141 00:07:21,280 --> 00:07:23,840 Speaker 1: it's still is profitable. Um, it doesn't have a lot 142 00:07:23,840 --> 00:07:28,680 Speaker 1: of debt to deal with. Its pretty good shape, all right, 143 00:07:28,720 --> 00:07:30,920 Speaker 1: Matt Townsend, thank you very much for joining us. He's 144 00:07:30,960 --> 00:07:34,280 Speaker 1: a retail reporter for a Bloomberg giving us the lowdown 145 00:07:34,400 --> 00:07:37,080 Speaker 1: on Barnes and Noble and the shares down more than 146 00:07:37,120 --> 00:07:46,320 Speaker 1: eleven percent. This is Bloomberg. Yeah. Miss. 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