Books Inc., which currently operates 11 bookstores in the Bay Area, filed a petition for voluntary Chapter 11 bankruptcy on January 20 in the U.S. Bankruptcy Court for the Northern District of California. The filing enables the company to restructure its finances while continuing to operate. A preliminary hearing is scheduled for January 27.
“After 174 years proudly serving Bay Area readers, we have filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code,” Books Inc. posted on social media. “This was not an easy decision, but it’s a necessary step to ensure we can continue as your neighborhood bookstore for years to come.” Books Inc. was established in 1851 and is the Bay Area’s oldest indie. It currently employs about 122 people.
In a declarations document submitted to the court as part of the bankruptcy filing, CEO Andy Perham said Books Inc. is seeking approval for a motion to authorize the payment of compensation due employees before the filing; a motion to allow the company to maintain its existing accounts and cash management system; and a motion authorizing the use of cash collateral. These steps, Perham argued, will give Books Inc. the quickest path to create a smaller, financially stronger company.
As a first step, Books Inc. will close its Berkeley store February 9. According to the filing, the Berkeley location’s lease expired on December 31, and Books Inc. was unable “to negotiate a reduced rent structure for a potential new term that would have allowed the store to operate profitably.” A press announcement indicated that “some staff” at the closing Berkeley store are “expected to be transferred to positions at the company’s remaining 10 locations.”
While Books Inc.’s other 10 stores across the San Francisco region—including two at San Francisco International Airport—will remain open at this time, the announcement acknowledged that the company “seeks to consolidate the number of physical retail stores.”
Books Inc. spokesperson Steven Silvers told PW, “There is no plan to close other stores,” and any additional closures “will be determined after all the other negotiations are complete.” Silvers, a consultant who assisted in Tattered Cover’s bankruptcy communications, emphasized that this is a voluntary Chapter 11 process in which the company requests the protection of the courts to consolidate. Outcomes “depend on all the negotiations that have to happen” with stakeholders including landlords, creditors, board members, directors, and investors, he said. “It’s in the company’s best interest to get a reorganization plan submitted as quickly as possible,” perhaps within six to 12 weeks.
Besides establishing new lease agreements, Books Inc. could consider cutting costs through “back office operations getting outsourced or consolidated,” Silvers added. According to the filing, the bookstore “has historically been profitable” and expects to return to profitability once the restructuring is completed.
Small Business Challenges in the Bay Area
In the bankruptcy filing, Perham cited a number of factors in the company’s declining financial fortunes. Perham explained that gross revenue, which reached $17.1 million in 2024, never returned to the pre-pandemic earnings of $20.9 million in 2019. Even as customer traffic improved, hybrid work models kept business at many of Books Inc.’s physical stores below 2019.
“It’s not that the stores aren’t doing a great job, it’s that people aren’t going to retail the same way” in shopping centers and along main streets, Silvers said. “The company still has a very loyal customer base and is a popular brand, but the whole retail sector has shifted.”
According to the filing, foot traffic “has declined to less than half of pre-pandemic levels” at the company’s Civic Center store in San Francisco, and changes in flight departures and arrivals at SFO have affected sales to travelers. While Books Inc.’s online sales have increased, that option only accounted for 2.5% of 2024’s total revenue.
Along with slipping revenue, Books Inc. cited “significant increases in operating costs, including higher payroll and rental expenses,” and noted that “increased interest rates have made it more expensive” to service its stores’ debts.
In 2023, Books Inc. created a 501(c)(3) literary nonprofit, Reading Bridge, to handle its book fairs, children’s events, and community outreach programming “so that the programs could continue without a negative financial impact,” but the nonprofit arrangement accounts for only a fraction of the labor and costs associated with daily business.
At present, the filing estimates the value of Books Inc.’s inventory to be approximately $2.5 million, including about $1.9 million in trade books that can be returned to the publishers for full credit. The remaining inventory, valued at approximately $600,000, is comprised of non-returnable materials. The filing also put Books Inc.’s funds on hand at about $550,000, with secured debts of about $1.8 million. The company also has approximately $3 million in unsecured debts, the largest of which is owed to publishers.
This is not the first time Books Inc. has found itself in Chapter 11. In 1995, Books Inc. filed for bankruptcy following the death of former owner Lew Lengfeld and the rise of competition from national bookstore chains. At the time, Michael Tucker and Stephen Mayer took the reins and steered Books Inc. back into solvency. Tucker and Mayer remain directors and equity owners of the company.
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