Monday, November 21, 2011

Are Quad/Graphics and Barnes & Noble Really on the Ropes?

Not again!

Those of us in the ink-on-paper side of the publishing world have become accustomed to our vendors and sellers going through bankruptcy reorganization. But seeing Quad/Graphics and Barnes & Noble listed recently by Business Insider among The Next 11 Big Companies That Could Go Bankrupt was a bit of a jolt.

When a big printer (Quebecor World) went Chapter 11 in 2008, it was no big surprise. Nor was the demise earlier this year of the big Borders bookstore chain. One was burdened by out-of-date plants, the other by an out-of-date business plan.

But Quad and B&N are supposed to be the strong survivors who benefit from the demise of their less nimble and innovative competitors.

BI’s list is based on research from GovernanceMetrics International that identifies companies with “an elevated financial distress probability and which have experienced high risk events that increase the likelihood of bankruptcy."

B&N is #5 on the list, with a "financial distress probability" of 6.32% and what BI calls a business model that is “only slightly more viable” than Borders’. Amazon’s new Kindle Fire and low-price black-and-white Kindles will “put pressure” on Borders and its competing Nook e-readers, BI says.

Quad is ranked #6, with a 6.25% probability of distress (during what period of time? BI doesn’t say.) It noted the big printer’s high debt and tight profit margins. BI also cited a recent analysis from The Street showing that Quad had a “quick ratio” (current assets to current liabilities) of only 0.77, which suggests questionable ability to cover its short-term cash needs.

A profile of Quad in the Milwaukee Journal Sentinel over the weekend pointed out that Quad has “lowered its full-year earnings outlook for the third time in as many quarters.” Also spooking Wall Street are declining sales in the book division, which represents only 7% of the company’s revenue, according to JS reporter John Schmid.

Seeing the stock lose more than two-thirds of its value in barely a year hasn’t helped either.

Other articles about Quad and B&N include:


Michael H. Bense - COO of Street Smart Marketing said...

Should Quad/Graphics be forced to file Chapter 11, once again their smaller suppliers will take the brunt of the financial hit. More likely then not, many of them will not be able to recover from the 10's or 100's of thousands of dollars, that they are owed by Quad.

Anonymous said...

Did anyone who published this type of story actually look at the financials of Quad Graphics?