The decision by many independent distributors to abandon the book business in favor of magazines over the last 10 years afforded the Chas. Levy Company the chance to consolidate its place in the book field. The "unnatural expansion," as Levy Home Entertainment president Howard Reese terms it, meant that when the magazine componnet, Chas. Levy Company, was sold to Source Interlink this spring (Foreword, Apr. 11), its book business had become 30% larger than its magazine sector. The sale of Chas. Levy left LHE as a stand-alone book operation. The company has a long-term contract with Source to fulfill its book business.
Now operating solely in the book space, Reese predicts LHE will have a "banner year" when fiscal 2005 concludes at the end of September. Through June, mass market paperback sales were up about 9%; hardcover sales were up approximately 8%; and sales in the trade paperback segment were flat. Sales in the children's area, even before the release of Harry Potter, were up 12%. Reese attributed the overall gains to a 5% increase in new accounts plus solid gains at existing stores.
LHE now distributes books to more than 13,000 stores, providing service to such important retailers as Target, Wal-Mart and Kmart. While reluctant to discuss how books are performing at the hypercompetitive, and secretive, Target and Wal-Mart ("Target is nicely committed to books," he said), Reese said he is optimistic about the book business at the recently merged Sears/Kmart. Books "held their own" during Kmart's bankruptcy and, going forward, he said, Sears will expand its book business as stores are remodeled. "They see books as a core category," Reese said. Plans call for Sears to expand the selection of books offered in stores as well as to give books a better location in stores.
Another growth area for LHE is supermarkets. Reese expects LHE's business with supermarkets to grow steadily over the next five years, to such companies as Stop & Shop and Kroger's. "Supermarkets like the margins on books and the fact that they are returnable," Reese noted. He added that as Wal-Mart and other mass merchandisers expand more into food, many supermarkets see expansion into non-food categories as a way to stay competitive.
Although LHE has expanded well beyond distribution of mass market paperbacks, the format remains important to the company. Reese said the sales gains so far this year reflect the expansion of mass market departments by some accounts. And while the increase is encouraging, he said, mass market paperbacks "are not out of the woods yet." LHE is a big supporter of the premium mass market format. Mass market publishers "needed to do something different" to bring attention to the format, said Mike Hesselbach, LHE's chief marketing officer. Early indications on the reception of the new format, Hesselbach said, are good, with gains in dollars and units and no signs of price resistance. Sales could be even better, Hesselbach believes, if publishers would do a better job of explaining the benefits of the bigger paperbacks on the cover. "An easy-to-read sticker would be nice," he suggested.
LHE and Reese remain optimistic about the book business. The company has just launched its second Authors at Sea promotion, and in the fall it will host its first Levy Triad conference, an event where publishers can present their lists directly to accounts.