Standing among the many piles of books being fastidiously organized to draw passing customers within the Piccadilly department of Waterstones in London, James Daunt is assured that this Christmas will likely be one other cracker for his ebook retailers.
Before Daunt grew to become managing director of the UK’s largest bookseller over a decade in the past, Christmas and January gross sales have been the chain’s saviour, making sufficient cash to cowl losses incurred throughout each different month of the 12 months.
Now, the shops earn a living each month of the 12 months, even when Christmas continues to be an necessary bump. “It was a ‘pile high, sell it cheap’ sort of world. We don’t do that any more,” mentioned Daunt, who can be chief govt of the a lot bigger Barnes & Noble chain within the US. “But Christmas is still essential. And so far, on every 25th of December, Christmas has happened.”
The efficiency of the group — which, together with Barnes & Noble, spans almost 1,000 shops and generates near $4bn in gross sales — is strong sufficient that Daunt has an eye fixed on a inventory change itemizing, saying it “would be a very sensible place” for the bookseller.
He final explored an IPO of Waterstones in 2018 forward of its sale to non-public fairness group Elliott however mentioned that the timing was not proper given the potential acquisition of Barnes & Noble, which Elliott purchased the next 12 months.
Both Waterstones and Barnes & Noble are including scores of shops, defying predictions that the web and Amazon would kill off the bookshop and a vindication of Elliott’s guess on the sturdiness of bricks-and-mortar retail.
Daunt is without doubt one of the strongest figures within the ebook trade, which has boomed in recent times as individuals returned to studying throughout the pandemic as an inexpensive pastime.
“In terms of the ownership of a business which is growing, but not now dramatically, I would have thought it would be in the public markets,” he mentioned. “We will pay a very nice dividend for a pension fund-type investment rather than being in private equity.”
A workforce that “is extremely vocational and extremely committed” additionally lends itself to a “stable ownership focused on the medium to long term”, he added.
One individual accustomed to Elliott’s plans mentioned that there have been no “near term plans to IPO but it was one of a number of options for the future”. Elliott declined to remark.
Daunt factors to development within the US as an attraction to traders. “The UK will grow a little bit, but in the US we have a completely different opportunity, which is much more exciting.”
Bookshops have disappeared from many US cities, Daunt mentioned, and simply by changing these the chain may develop quick. “The contraction in the United States is so much more dramatic than it was in the UK, that there really is an opportunity.”
He has added near 60 retailers since taking on Barnes & Noble in 2019, and mentioned that “they are all a success . . . people queue up on the opening day. It doesn’t matter whether we’re doing that in New York City or in the middle of nowhere.”
Barnes & Noble now operates about 620 retailers and is planning to open 50 extra throughout the US subsequent 12 months. The US group is anticipated to function on comparable margins as Waterstones this 12 months, which might equate to about £400mn in revenue from about £3bn in gross sales. “That’s why you can open up a lot of shops. Invest in your IT infrastructure and distribution. It’s a nice engine,” mentioned Daunt.
In the UK, Waterstones has about 320 shops, and is opening about 10 extra yearly regardless of rising prices from wages, distribution and transport. Over time, Daunt mentioned he can see synergies from bringing collectively the back-office features reminiscent of IT throughout Waterstones and Barnes & Noble.
He added that Waterstones sometimes grows income by about 2 or 3 per cent yearly. Sales, which fell throughout the pandemic however rebounded strongly after, are roughly 9 per cent greater than in 2019.
If it returns to its anticipated long-term pattern this 12 months, the enterprise ought to make £50mn-60mn in earnings on income of about £350mn of gross sales.
Daunt bought his begin within the trade when he based an eponymous unbiased bookshop chain based mostly in London within the Nineteen Nineties, after a short profession at JPMorgan as an funding banker.
His private possession of the now seven-strong Daunt Books, which is the second largest unbiased chain within the UK, along with the Waterstones function means he controls nearly all of unbiased excessive avenue ebook gross sales within the UK exterior supermarkets and retailers reminiscent of WHSmith, though these are nonetheless dwarfed by Amazon. Under Elliott’s possession, Waterstones has since purchased different main rivals Foyles and Blackwell’s, giving him much more affect.
“This is quite a large sort of market segment with one player,” he admits.
Daunt favours a hands-off strategy in terms of his retail empire, preferring to belief native store managers to know promote books on their excessive streets.
It was a method he deployed when he took over Waterstones in 2011 after banks seized management of the struggling chain from retailer HMV. The turnaround additionally concerned stripping out head workplace prices and reducing again on merchandise not linked to books and the extra mental world of Waterstones reminiscent of presents and stationery — “all of the cushions. I was very, very suspicious of anything that involves fabric.”
Even pricing adjustments relying on the store — individuals dwelling in prosperous Hampstead can count on to pay extra for sure books than these in Doncaster, for instance.
The launch of Amazon’s Kindle proved difficult for the chain — sending gross sales of bodily books sharply decrease — however Daunt took the counterintuitive stance of stocking the digital gadgets in retailer.
Daunt mentioned that he has utilized the rules that helped restore Waterstones’ fortunes to Barnes & Noble. When promoting books, “there are more differences within the countries than there are between the countries,” he mentioned.
While he offers “principles” about how retailers ought to loosely look, retailer managers are allowed to make use of their very own creativity and judgment in terms of tempting Christmas customers with their shows.
“You know what Waterstones is. I don’t need to spend billions making it look the same,” he mentioned.