March 29, 2006 | posted by Michael Baxter in Uncategorized |

If you are in the book trade, here’s the good news. According to Ottakar’s boss, James Heneage, the market is growing 2 to 3% a year at the moment, and with the latest Harry Potter book published last year, the UK public went out and read more than ever.

Yet despite those promising fundamentals, Ottakar’s lost £4.6mn last year, after making £6.9mn a year earlier. And in the last 8 weeks, like for like sales were down 8.1%, although the fact that last year the period included Easter was responsible for at least some of the fall.

And while the store made a loss last year, this was largely due to one off factors.

But why does little Ottakar’s struggle so when the market is growing?. No prizes for guessing the answer.

As Mr Heneage said: “There is a structural shift towards supermarkets and the internet.”

He talked about price pressure, giving Harry Potter’s latest book as an example. “We had some supermarkets selling it for as low as £4.99, well below the price at which we could buy it. In this climate of aggressive price discounting, we chose not to follow others and at least kept margins intact, but sales suffered,” he said.

Mr Heneage did give reasons for shareholders to hope, however. “Supermarkets are never going to be specialist retailers and the internet does not have the service we offer. People still want to browse” and that the shift in power to supermarkets and the Internet “will be finite.”

Ottakar’s expect things to improve this year. The holy grail of the book trade at the moment is Dan brown’s latest book. Talk is, it could be launched this year.

Ottakar’s itself has attracted the attention of Waterstone’s owner HMV. That retailer itself has shaken off its predators and is likely to renew interest in the specialist book store, meaning that Ottakar’s could be heading towards its last chapter.

Authors are against the idea, and last year signed a petition to keep the two companies separate.

But, however this story unfolds, it seems likely the price offered for Ottakar’s will be lower than the level first discussed.

Sources
Price war forces Ottakar’s into a £4.6m loss
Independent