With a Price to sales ratio under .8 and technical charts indicating upward trends, it's hard to see why anyone would SELL BKS. Margins are improving and sales are up and with analysts downgrades earlier this year, some of them will have to revise their estimates upwards... this is a favorable situation.
While the numbers may look good. Check out the debt. You are assuming that cash flows will continue for a while. The market is reaching saturation, and one main reason for BKS growth has been the opening of new stores (an average of 86 per year over the last 7 years!). This growth has been very costly, and they have lots of debt right now.
Sound the market turn away, or a competitor such as Borders or even the Web really catch on, B&N could be faced with lots of debt service, and not much cash flow to pay it with. Short term-things look great. Med term-maybe. Long term-I'd take a wait and see.
The BKS debt was the original reason I was much hotter on Borders than BKS. Then I looked at the amount of superstores BKS has, and the debt again, and it basically seems to me that they are in good shape. I think they might have expanded just fast enough to capture enough market share to pay off the debt and then reap the benefits. What I am a little wary of is that international expansion will be more costly and less profitable than national expansion, which might leave the balance sheet a little worse. Hopefully management will test the waters before diving in too deeply. If it is a nice temperature, they will again be ahead of the market to expand their business. As I see it, BKS is using it's size to its advantage, and this strategy seems to be paying off. There is still room for Borders and BKS to grow without hurting each other, but this too will pass, I just don't know when. When that happens, BGP must be in a better comparative position, and cash over debt probably won't be the answer. Popular stores are what's needed for the upcoming competition. Anyone have info on BKS vs BGP, store for store?
I bought because they seem to have the right approach to business. I did buy books thru the Net from them and it worked very smoothly. I feel they are another Wal-Mart for the next few years...then? Our society...I think...are becoming more book reading oriented bcasue of the aging and divorce factors....just a guess but i think it a possiblility.
that is a very interesting viewpoint on future readers, ebean. here is mine
people have talked about the death of the book...but i have always thouhgt that to be sheer nonsense. nothing...no matter how much the technology morphs and miniaturizes...nothing, will ever replace the book for its portability and ease of use.
as an ever increasingly consumer oriented society...see the purchasing power of teens and preteens---we are taught to define ourselves by the symbols we surround ourselves by. lifestyle products i call them. open a j. crew catalog or a pottery barn catalog sometime, you will see an instant stageset in which the consumer is asked to envision themselves in. " i want my house to look like it was designed by crate and barrel." "is that a williams-sonoma kitchen?"
unfortunately books/publishers have succumbed to this marketing strategy. increasingly, the books purchased are lifestyle books...how-to books. or true-fiction. all of the trends here are quite bizarre. and in my 28th year , i decided that it was time to profit from this unfortunate trend in american society, rather than just bemoan it. ahh what else is capitalism for? (i hide my head in shame behind the alias, monk1202.)
apologies for the screed but this is a longwinded way of talking about how effective B&N has been at creating a new kind of public space in america. commercial, of course. and yes, private. but it is truly a meeting place for communities. go to any of their stores and you will surely hear neighbors running into one another or colleagues each on their break from work. this is an amazing transformation in public space. i sometimes think of it as a secular church. or a commercial post office/library.
the synergies between publishers and savvy booksellers such as B & N have never been greater. and the computer, which ultimately alienates us all from one another, helps this relationship immensely, as it easily offers up books based upon keyword searches. "i have a fear of mittens." I type, "mittens and fear." 8 direct matches. 3 from simon and schuster etc.
ugh...like a raymond carver short story, my appreciation for B&N is both sad and hopeful.