The reduction in the sales area, however, generated an almost 30% increase in sales per square meter in its first year out of insolvency.
“We saw some recovery last year, we saw we could finally say we stabilized the business. We are not expecting significant growth this year, but the business should increase,” said Amalia Buliga, 34, the manager to who has been running the Diverta bookstore chain since 2010 and has been working for the company for ten years.
Diverta expects sales to be about the same as in 2014 or a potential organic growth of 5% that would contribute to a EUR400,000 EBITDA, higher than last year’s EUR250,000.
Diverta closed three stores last year and opened a new one in Craiova.
“We decreased the sales area quite a lot and that was the move that got us back in shape. For instance, we had 3,000 square meters in Plaza Romania (Drumul Taberei, western Bucharest) and are now down to 700, in Vitan we had 1,800 and are now down to 700, we also cut some in Baneasa,” says Amalia Buliga.
The company has budgeted two new stores in Sibiu and Constanta for this year, but aggressive expansion like it did in 2008 is out of the question in the next three to four years, she added.
Diverta then bet on large sales areas, including space for video games and movies and opening stores in highly visible areas, such as the former Eva store on Magheru Boulevard (center of the city).
“We bet on organic growth and that is what happened, we saw 9% growth for our stores in the first four months. It’s better than expected, we had expected 3% to 4%.”
The increase in sales will help the company ‘calm’ its suppliers about its debts, which stand at EUR5 million. Out of this amount, EUR2.5 million are debts to banks.
The bookstores were registered to Pro Express Retail until 2013, which had gone insolvent on EUR10 million debt and is now bankrupt. The current operator of the Diverta network is Blor Retail.
Books generate about one third of Diverta’s revenue, and its competitors on this segment put at EUR50 million to EUR60 million are Carturesti, Humanitas and Compania de Librarii Bucuresti. Books generate less than one third of Diverta’s revenue in Bucharest, but outside the capital city, books and stationery account for 90%.
Revenue generated by toys has increased a great deal over the last few years to the current 20%. The toy market is three times bigger than the book market, and is estimated at EUR130 million to EUR160 million.
“Other companies in Europe are trying to diversify, to not sell only books any more, partly because of the threat of websites like Amazon. It’s not so serious over here, but digital is the future,” Buliga said, adding she was considering development of the ebook segment.
Diversification is what the concept of the store in Piata Romana (central Bucharest) that the company opened in early May is about. Diverta rented only half of the 600 square meter building next to the Bucharest University of Economic Studies, because “we know what we can pay and what not.” The store will add a coffee shop this month with personal development games and entertainment, and a space for events, sublet to a partner company. Diverta already has such a store in Cluj and Buliga says she will not implement the model in other stores of the chain.
(English version by Loredana Fratila-Cristescu)