Exhale, Barnes & Noble (NYSE: BKS) shareholders, even if it may be your final breath.
Shares of the chain of cavernous bookstores climbed nearly 4% yesterday on news that rival Borders was liquidating.
It's an instinctive reaction. When Movie Gallery shut down its DVD rental stores, Blockbuster shareholders cheered. When Circuit City liquidated, Best Buy's (NYSE: BBY) mouth started watering. I'm not sure who the first major buggy whip maker or CD retailer to shutter its doors was, but I'm sure there were high-fives to be had all around initially from its rivals.
Blockbuster filed for bankruptcy. Best Buy has suffered through three consecutive quarters of year-over-year declines in profitability and same-store sales. Good luck identifying the remains of the rest.
History is repeating itself, and I'm surprised that buyers of a bookseller haven't figured it out.
A disrupted industry is a lot like a 1980s slasher flick. All of the remaining characters are relieved when it's someone else who gets gruesomely nixed, but their turn is just frames away. No one gets out alive. Even the screaming girl who seems to have done in the baddie isn't safe. She'll be the first to go in the sequel.
Where's the net that will save B&N from being the next Borders?
- The Nook rocks? Yes, but it's a money pit.
- Liberty Media's (Nasdaq: LBTYA) John Malone or someone else will be there to save the day? Why, when the inevitable bankruptcy or fear of bankruptcy will drive a much better deal? DISH Network (Nasdaq: DISH) nabbed Blockbuster for just a little more than what liquidators were willing to pay. Malone himself was smart to call bottom when he picked up a 40% stake in Sirius XM Radio (Nasdaq: SIRI) when the company was going for less than the tax-shaving value of its billions in net operating losses. Waiting makes a disrupted company cheaper, and who is in a hurry to buy a struggling bookseller?
- Borders closing down its last 399 stores will be a near-term boost -- really? Liquidation sales at neighboring Borders locations will thin out B&N shops in the coming weeks. After that, there's probably a reason why they were choosing Borders over B&N. The commute to Amazon.com (Nasdaq: AMZN) will be an easier drive.
- B&N will cash in on BN.com. Isn't the site already appealing to Amazon's affiliate marketers who are getting shut out over state sales tax disputes? Yes, but the only reason that's happening is because Amazon is protecting its state sales tax pricing advantage. It's choosing to back its customers over its marketers, and that's bad news for bricks-and-mortar retailers.
Just because B&N will be the last one standing doesn't mean that it will be standing for long.
Queue up the John Carpenter music, please.
Can Barnes & Noble be saved? Share your thoughts in the comment box below.
