*WINNER* Survival of the Fittest: Financial Analysis of Barnes & Noble’s Survival Strategy

  • Jacob H. Phillips
  • Jacob S. Donegan

Abstract

Internet retailers changed the economics of modern retail by offering low prices and extreme variety. CNBC reported that more than 20 retail companies failed in 2017. A market research firm, CB Insights, identified 57 retail company failures since 2015, including retail giants Sears and Toys R Us. Traditional brick-and-mortar retail businesses struggle to keep up with Internet platforms like Amazon. Retailers seek new strategies to stay relevant while watching others lose the fight. In the shadow of Amazon, this project examines the struggle of two traditional bookstore chains: Barnes and Noble (B&N) and Borders. How did B&N stay afloat when other retail booksellers fell? Are they destined for the same fate as other retailers in a world of online giants? Using fundamental financial statement analysis, we compare B&N, one of the last publicly traded retail booksellers, to the now-defunct Borders. We identify similarities and differences between B&N's financials and those of Borders before its closure. Specifically, we observe B&N outperforming Borders in the cash conversion cycle, days inventory turnover, and long-term debt over equity. We observed through comparison of the current and cash ratios that B&N trailing behind Borders in their ability to cover short term debts. We also examine Barnes and Noble Education, a spin-off of the parent company, and a potentially strategic misstep in spinning off a growing and profitable business segment. The pattern in the data suggests that uncertainty in B&N’s going concern may soon become a topic of discussion.

Published
2019-04-17
Section
Business