What’s future of Barnes & Noble after CEO exit?

The abrupt resignation of the CEO of Barnes & Noble is raising questions about the future of the only remaining national bookstore chain in a digital age.

After three years as chief executive, William Lynch Jr., 43, resigned without explanation Monday. Two weeks ago, the company reported another unprofitable quarter – sales down 7.4% from a year ago, as its net loss doubled to $119 million.

The biggest financial problems are in the digital Nook division, which faces increasing competition from Amazon, Apple and others. Barnes & Noble also announced recently that it would stop making its own color tablet, the Nook HD, though would continue with its simpler Nook e-readers.

That raises questions about its digital strategy as well as the future of its 675 bookstores, down from a peak of 726 in 2008. The company already announced plans to open five new stores this year while closing another 15 to 20 as their leases expire.

And the biggest question: Is Barnes & Noble in danger of going the way of Borders, once its chief rival, which went out of business in 2011, closing more than 600 bookstores?

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“Ultimately, yes. Imminently, no,” says Mike Shatzkin, founder of the Idea Logical Company, a publishing consultant, and an organizer of the annual Digital Book World conference.

He adds, “The market changes hit them both. But when the flu hits town, the old and sick die first. Borders was mismanaged as a retailer, B&N was not.”.

Michael Norris, an analyst for Simba Information, a market research firm, says Barnes & Noble has “a good physical bookstore business and a decent e-book business, but they didn’t create a system where one side could feed the other.”.

He warns that if B&N “can’t find a leader who can bring both those businesses together, then it will be more like Borders.”.

A new CEO has not been named, although three executives were given additional responsibilities. That triggered a headline in Publishers Lunch, an influential digital newsletter: “Lynch Resigns from Barnes & Noble; Is Replaced By No One In Particular.”.

Executives are not commenting beyond statements issued Monday. B&N’s chairman, Leonard Riggio, 72, previously expressed interest in buying the bookstores and running them as a separate business, but has not made a formal offer. Monday, he said in a statement, “The company is in the process of reviewing its current strategic plan and will provide an update when appropriate.”.

Peter Osnos, founder of PublIcAffairs Books, says, “Riggio is a great bookseller and entrepreneur. I think that the overwhelming sentiment among those of us in the publishing industry is to want to see B&N work its way through this difficult period. Consumers need a broad cross-section of stores and online retailers…I want to bet on Riggio and his colleagues to find the right way forward.”.

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Carol Fitzgerald, founder of BookReporter.Com, says that before Borders collapsed, both chains faced similar issues: “Oversized stores and a shrinking of two categories, music and DVD videos.” But B&N “was in a better cash position to weather the storm, which is how they survived.”.

She suggests that what B&N needs to do now is “what Borders started to do with their concept stores, but it was too late. It needs to quickly examine what the consumer really wants in stores…It has the space to create ‘shops’ in its stores for readers — book group shops, YA (young-adult) shops. Think the first floor of Harrod’s (the famed London department store) to make shopping there an experience. The warehouse approach needs to be redefined to be something fun.”.

Shatzkin sees a different challenge: “Adjusting to a book world that is less printed and more digital and far less in shops and far more online.”.

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