Indebted, Saraiva asks for judicial recovery and ‘fault’ Netflix and Spotify

Indebted, Saraiva asks for judicial recovery and ‘fault’ Netflix and Spotify

Livraria Saraiva, the leading retail chain in book sales in the country, filed for bankruptcy on Friday (23). With a debt of R $ 674 million, the company is the second company in the sector in just over a month to request protection from the courts to restructure debts and try to continue operating. Culture has been in judicial recovery since last month.

Saraiva’s difficulties were evident earlier this year, when the company delayed payments to book publishers – its main suppliers. The company has struggled again in recent months, and a new negotiation period has started. After failing to close a deal, the company decided to go to court.

In the request made to the Court, Saraiva recalled that she has been trying to restructure her own business – a process that is being run in conjunction with the consultancy Galeazzi & Associados. Recently, the company closed its activities at 19 points of sale, eight traditional stores and eight iTown units, which sold Apple-branded technology products. In the process, it cut 700 employees.

Another measure taken by Saraiva was the exit of categories in which profitability is lower – such as the sale of technology products, in which it must face up to heavy weights such as Via Varejo (owner of brands such as Casas Bahia and Ponto Frio) and FastShop. The entry into the segment was decided a few years ago, as an attempt to “protect” the prospect of falling book sales.

“In this movement (the departure from the technology area), Saraiva will substantially decrease the generation of tax credits, one of the main reasons for cash consumption in recent years”, says the company, in the court reorganization document. To continue offering electronics and technology items in stores, the company must seek a partnership with a specialized network in the sector.

Prices and ‘culprits’

Despite the sale of books showing a small increase in 2018 – of about 5% in values, according to the National Union of Book Publishers (Snel) -, Saraiva recalled that the price of the product has risen much less than inflation . According to the company, while the IPCA – official inflation index – rose 53.8% from 2000 to 2017, the book’s unit value fell 8%, in the same comparison.

Another segment that was once the second largest source of revenue for Saraiva – music and films – was greatly affected by technological advances, according to the company, which cites in the request for recovery document the emergence of services such as Netflix and Spotify in this area.

Today, the company is dedicated only to retail activity. The recovery request recalls that the company sold its editorial and educational assets three years ago, for R $ 725 million. After this deal and a period of downsizing retail, the group now has about 3 thousand employees, 85 own stores and a sales area of ​​almost 50 thousand square meters in the country.

Founded in 1947, Saraiva’s origin dates back, however, to 1914, when bookseller Joaquim Ignácio da Fonseca Saraiva, a Portuguese immigrant, opened a small tallow on Rua do Ouvidor, in São Paulo, called Saraiva & Cia. Saraiva is a publicly-held company since 1972. In 2008, it acquired rival Siciliano.

In crisis, Livraria Cultura files for bankruptcy