Saturday, February 26, 2011

UK's big four could be worst hit in REDgroup collapse

The Bookseller - 25.02.11 - Charlotte Williams

Photo - Kirk Hargreaves, The Press.
The UK's big four publishing groups—Penguin, Hachette, Random House and HarperCollins—could be the worst hit in terms of exposure to the ANZ market according to Nielsen BookScan data, following REDgroup's collapse in Australia and New Zealand last week.

REDgroup entered voluntary administration last Thursday, within 24 hours of Borders entering Chapter 11 in the US. Ferrier Hodgson Partners has been appointed as REDgroup's administrators, with a creditors' meeting due in March. The group is the parent company of booksellers Angus & Robertson in Australia, and Whitcoulls and Borders in New Zealand. Estimates indicate REDgroup is responsible for 20% of the book market in Australia, with Whitcoulls taking 75% in New Zealand. Industry experts estimate the Australasian market was worth £140m to UK publishers in 2009.

In terms of Australian market performance, the value of the book market fell from AUS$1.29bn (£809.0m) at the end of 2009, to AUS$1.25bn (£783.9m) at the end of 2010, according to Nielsen BookScan data. However, volume sales were up by 1.4 million.

Pan Macmillan managing director Anthony Forbes Watson said: "It's bad for confidence in bricks and mortar retailing generally." Sylvia May, international sales director at HarperCollins UK, confirmed industry feeling that the move had not come as a complete shock to publishers. May said: "It wasn't a massive surprise. They had a troubled few years and the business has been flagging." In October, REDgroup reported a full-year loss of AUS$43m (£27.0m), and warned it was likely to breach two of its three banking covenants due to increasingly tough trading.

May added: "It's the same issues worldwide; reduced consumer spend, greater competition from the internet and the high street suffering." Both Amazon and The Book Depository are offering free shipping to Australia, in a bid to break into that market.

However, May suggested sales through discount department stores, independents and non-trade as well as the potential for some Angus & Robertson franchise stores to remain bookshops could be cause for optimism.

Meanwhile, Barnes & Noble is reportedly eyeing some of Borders' store portfolio. The retailer's widely predicted collapse into Chapter 11 bankruptcy last week led to it announcing it was closing 200 stores, with a further 75 expected to be shut.

The retailer was losing about $2m a week when it went under. Penguin is the largest unsecured creditor with a $41m (£25.3m) claim. Hachette is owed $36.9m (£22.8m), Simon & Schuster $33.8m (£20.8m) and Random House $33.5m (£20.7m). UK publishers' exposure to Borders' business is believed to be low.


Jacqueline Howett said...

Borders was one thing, but now this is really hitting below the belt! I love reading all your info, you do a great job.... keep it coming!

transpress nz said...

That estimate of a 75% market share for Whitcoulls in NZ is way too high. A few years ago they themselves only claimed to have a third share; the real figure last year was probably only about 25%,- and at least half of that would have come from imported remainders, not from local publishers. In 2009 they only represented about 10% of our NZ sales, last year about 5%.