Barnes & Noble Inc. moved into the restaurant business two years ago, but the bookseller is finding foodservice more difficult than it expected.
“The top line on our restaurants is good. The bottom line is awful,” said Len Riggio, founder and chairman of the New York-based company, in a Sept. 6 first-quarter earnings call.
The bookseller has opened five restaurant bookstores in the past two years, and Riggio admitted that foodservice is “a lot harder than you think it is.”
Barnes & Noble has its Kitchen restaurants in five cities since 2016, including: Ashburn, Va.; Edina, Minn.; Folsom, Calif.; Plano, Texas; and Scarsdale, N.Y. Menu items range from guacamole and chips at $10 to plancha-cooked salmon with tabbouleh salad for $22. The restaurants also offer beer and wine.
Some the restaurants are performing well, Riggio said, adding that customers at Scarsdale/Eastchester, N.Y., location, for example, “absolutely love the restaurant.”
However, the five Kitchen restaurants – which offer full service and grab-and-go orders as compared to the many coffee shops in its traditional bookstores – are a “mixed bag” in performance.
“The essential problem being that we do not have a culture of running operating restaurants,” Riggio said. “Things like controlling food costs and payroll costs are not in our DNA.”
He admitted foodservice is “a lot harder than you think it is,” which is clouding the future of more Barnes & Noble Kitchen.
“I think we will have improvements in our café,” Riggio said, with those based on what the company has learned in its five restaurant operations.
As Barnes & Noble trims the footprint of its stores, carving out space for a sit-down restaurant becomes more challenge, executives said.
“We're looking at stores of much less than the 25,000 square feet at this point,” Riggio said. “So we're prototyping stores maybe as little as 8,000 to 10,000. Right now, we're at 10,000 to 14,000.”
He said restaurant need about 2,000 to 3,000 square feet, so the company was “not really clear that we're going there yet.”
For the first quarter ended July 28, Barnes & Noble’s net loss widened to $17 million, or 23 cents a share, from $10.8 million, or 15 cents a share, in the same period a year ago. Revenues declined 6.9 percent to $794.8 million from $853.3 million in last year’s quarter.
Barnes said same-store sales for the first quarter declined 6.1 percent, but they improved sequentially in each month of the period. In August, same-store sales were down 0.8 percent.
Barnes & Noble has 629 bookstores in all 50 states.
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