Written by Thomas Buckley and Scott Duveau
Last fall, during a visit to Barnes & Noble’s flagship store in New York City’s Union Square, the British bibliophile James Daunt strode about the ground floor in oxblood loafers deploring the bookshop’s hideous appearance. The carpets were dusty, and the escalators had broken down. A cheap pine table was littered with trinkets and scented candles. A vase was wedged between new titles, its bouquet of sunflowers sagging in brown water. “I like the idea of the flowers, but you have to change the water,” Daunt said. “And you have to put in decent flowers—you can’t just go down to the petrol station and grab a bunch. I mean, look at it.”
Daunt has opened about 60 bookshops in his three-decade career, every one of them profitable, making him one of the Amazon era’s most successful booksellers. After founding Daunt Books, a popular, independent brand of stores in the U.K., he was credited with saving the country’s largest chain, Waterstones, from ruin by giving managers more agency over their inventory. Those credentials impressed Elliott Management Corp., a notorious $40 billion hedge fund better known for seizing an Argentine warship as collateral and berating corporate governance at Twitter Inc. and AT&T Inc. It acquired Barnes & Noble Inc. last year for $683 million including debt and appointed 56-year-old Daunt chief executive officer, the man in charge of its rescue.
In its 1990s heyday, Barnes & Noble’s superstores blended the sociability of a Starbucks with the bargaining talent of a used-car dealer. But two decades after Amazon.com Inc. capsized the bookselling industry, America’s largest chain of bookstores was flirting with bankruptcy. By the time it was acquired by the hedge fund, its footprint had been slashed in half to a little more than 600 stores, sales were in their seventh straight year of decline, and the company was hemorrhaging cash.
Elliott became traditional bookselling’s unlikely defender in 2018 after its buyouts of Waterstones and Foyles, a British chain that had been owned by the founding family for more than a century. For Paul Best, who runs a portion of the investment firm from its London office and has taken a shine to companies battered by the retail apocalypse, the distress at Barnes & Noble signaled that he was buying the clunker at exactly the right time. “The more disrupted the category, almost the better,” Best says. “Because if you’re still there after that, you probably have durability and you’ve demonstrated a reason to exist.” His research showed the book business had potentially reached a nadir: The e-book market had started shrinking in some countries; the overall value of physical books was rising; and America’s smaller bookshops were growing again. At three times the size of its closest competitor, and the only major chain left of its kind in the U.S., Barnes & Noble was the cockroach after the catastrophe.
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