If there were any doubts that Chas. Levy Company made the right decision when it sold off its magazine business last year to focus on books through its wholly owned subsidiary Levy Home Entertainment (PW, Apr. 11, 2005), they should soon be laid to rest. With projected shipments to customers expected to exceed $850 million for the fiscal year ending September 30 and a new warehouse set to open near the company's headquarters in Chicago, LHE is shoring up its position as one of the biggest book distributor/service merchandisers in the U.S.

According to LHE's president and CEO, Howard F. Reese, the dollar value of book shipments has increased more than 83% in the past five years, and he predicts that by fiscal 2008 the company will reach $1 billion in billings. In part, the company's strong sales are attributable to increased sales at its top accounts—mass merchandisers like Kmart/Sears, Meijer and Target. And LHE continues to do a brisk business with supermarkets and drug stores, including Kroger's, Rite Aid and Stop & Shop.

In terms of categories, while sales of children's, hardcover bestsellers and trade paperbacks have all "skyrocketed," according to Reese, mass market paperback sales have been softer. Thirteen years ago, mass market was 55% of Levy sales. In 2006, the category's share dipped to 26%, but by putting a new emphasis on the segment, LHE is looking for mass market's share of sales to rebound to 30% in the next two years. To achieve that, Mike Hesselbach, senior v-p, sales and marketing, is planning to allocate more space and adjust the title mix. "We are doing with mass market paperback what we have successfully implemented with hardcover and trade: increasing the bestseller offering to take advantage of what is hot and timely," he said.

But it's not just sales at longtime accounts that are contributing to LHE's overall growth. Through the 10-year distribution deal that it inked with Source Interlink last year, LHE has significantly increased the number of accounts it services, up from 13,000 retail locations in 2005 to 17,500 today.

Even with the opening of several distribution centers in recent years, LHE is running out of space. To remedy that, LHE is replacing its Hillside, Ill., distribution center with a new one in Romeoville, Ill., which will triple the storage capacity available at Hillside. Romeoville makes its first shipment in August.

This fall, LHE will implement a new forecasting and replenishment system based on maintaining inventory targets by title by store. It's all part of Reese's overall objective for LHE to be the most effective distributor for books. He attributes Levy's ability to thrive despite tough times for many distributors to technology.

Koen-Levy

And, some might add, diversification. While LHE's business model is based on selling large quantities of a limited number of SKUs—roughly 8,000 titles are on hand at any one time—seven months ago, it opened Koen-Levy Book Wholesalers LLC in Moorestown, N.J. (PW, Oct. 17, 2005). Currently, Koen-Levy stocks 76,000 titles, and in the next few months that figure will rise to 85,000 to 90,000 titles. Although Reese said that sales at Koen-Levy have "exceeded our expectations," he added that the wholesaler needs to continue to pursue revenue growth and limit the increase in operating cost. Although there is no timetable to ship beyond the Northeast, the near South and Ohio, Reese said, once Levy gets Koen-Levy operating as efficiently as possible, it may duplicate the model in other regions of the country.