After racking up losses of nearly $1.8 million in four years, the Bookstore at the University of Montana is finalizing negotiations with Barnes & Noble College to operate the campus store.
In recent years, the Bookstore has experienced a financial slide due in part to falling enrollment and dropping attendance at football games, and the nonprofit has been selling off assets in order to stay afloat.
A letter of intent signed earlier this month by officials from the Bookstore and Barnes & Noble College anticipates the parties will work in good faith to negotiate an agreement by the end of June. Bookstore COO Eamon Fahey said the nonprofit is slated to turn over keys on July 2, and an initial contract is expected to be in place for five years.
"I think ultimately, this is going to benefit everyone," Fahey said Tuesday. "The Bookstore organization will end up in a better place financially. All of our employees have an opportunity to stay on employed."
Barnes & Noble College, or BNC, is part of Barnes & Noble Education. In 2015, Barnes & Noble Education legally separated from Barnes & Noble Inc. and is its own publicly traded company, according to its most recent U.S. Securities and Exchange Commission filing.
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Last year, the Bookstore sold the University Center Market to UM Dining for $328,000, and it has been trying to sell a vacant lot on Russell Square for $599,999 the last couple of years.
It also has sold a warehouse, and reduced staff and cut the amount of space it leases from UM.
Losses have mounted nonetheless. This year, Fahey said the Bookstore projected a 7 percent drop, but it experienced a decline of more than 20 percent instead.
Publicly available tax filings count earlier losses as $670,000 in 2012, $290,000 in 2013, $289,000 in 2014, and $545,000 in 2015. The Bookstore's 2016 filling was not available in time for this story.
Barnes & Noble Education operates 782 campus bookstores as BNC and 698 virtual bookstores through another subsidiary. A report to investors notes anticipated net income of $105 million to $120 million in the 2018 fiscal year and flat to slightly declined sales through BNC.
Last summer, a Barron's report noted investors were concerned about the company despite its quarterly results, pointing to "challenging industry trends" such as college enrollment declines. In December, another Barron's story said management touted the company's new deals, which helped "rejuvenate" it from a "traditional bookstore business."
As part of its negotiation with the UM Bookstore, Barnes & Noble College will pay a guaranteed amount to the Bookstore every year or a percentage of sales, whichever is greater, Fahey said. He declined to share the amount but said the income from BNC will be the Bookstore's new revenue stream.
"What the Bookstore really needs is basically an investment in the business," Fahey said. "And again, because of our finances, we can't come up with that money on our own. So this partnership basically gives us that investment."
As part of the deal, Fahey anticipates the store will have more materials such as books, and it will continue to carry art supplies. He said BNC is not contractually obligated to stock the store a certain amount, but it has the resources and vendors to do so.
"They're just able to more efficiently run this business — more efficiently than we can as an independent in today's world," Fahey said.
The Bookstore provides BNC utilities and space, which the nonprofit leases from UM. Employees eventually will become part of Barnes & Noble College.
The partnership will allow for local operation of the store, and the deal will not rebrand the Bookstore, Fahey said: "We wanted this to be a soft branding as opposed to putting Barnes & Noble branding all over the store, which they do at some of their stores."
Fact and Fiction will remain affiliated with the UM Bookstore. However, the downtown shop will operate independently of the UM Bookstore's deal with Barnes & Noble College, and Fact and Fiction will no longer sell books on campus.
Typically, Barnes & Noble College deals directly with universities instead of with independent third parties such as the Bookstore, Fahey said.
A campus spokeswoman did not respond Tuesday to an email with questions as to whether the Bookstore's contract with Barnes & Noble College is a good deal for UM in the long run.
Alex Butler, president of the Associated Students of the University of Montana, said the deal with Barnes & Noble College will be acceptable if it doesn't interfere with the needs of students.
"I think it's a good deal as long as students are able to continue to buy textbooks at affordable prices," Butler said.
A campus email notes the Bookstore will be closed in the transition from noon on June 23 through Monday, July 2.