Ruminator Books, founded in 1970 in St. Paul, Minn., by David Unowsky, is looking to raise between $450,000 and $1 million in a public offering. Proceeds from the offering, which is being made only in Minnesota, will be used to pay past-due rent, overdue loans and outstanding accounts payable as well as providing the retailer with cash to purchase additional inventory and fund sales and marketing initiatives. Ruminator, originally founded as the Hungry Mind, plans to combine the proceeds from the offering with a $300,000 loan from the Small Business Administration to reverse several years of declining sales.
According to the offering documents, sales at the store fell 11.8% in 2002, to $2.9 million. The company attributed the decline primarily to a lack of cash, which prevented the company from buying sufficient inventory. Ruminator had 40,000 to 60,000 titles in inventory in 2002 and 2003, down from a high of about 100,000. Despite the drop in sales, cost controls—which included layoffs, a decrease in promotional expenses and the closing of its textbook store—helped Ruminator reduce its net loss in 2002 to $147,137 from $479,200.
A portion of Ruminator's revenue, 29% in 2002, came from the sale of textbooks to Macalester College students; Ruminator had served as Macalester's bookstore from 1972 until this fall, when Macalester suspended the operating agreement. As a result, Ruminator expects only about 19% of sales to come from sales to Macalester students this year. The college is also Ruminator's landlord and is owed $92,000 in back rent.
Ruminator said its current financial problems are the result of several factors, including the store's failure to quickly adjust to changes in the industry. The store was slow to introduce higher-margin items such as gifts and cards to its inventory mix, which was almost solely books. The store was also slow to computerize and to update its financial management controls. A slowing economy and overexpansion were also cited as factors for the store's financial struggles.
The company intends to continue to publish the quarterly Ruminator Review, although that publication, along with the company's book publishing subsidiary, Ruminator Publishing, is for sale. In January 2002, Ruminator had reached a preliminary agreement to sell the Review for $300,000, but financing fell through. Ruminator Publishing will stop issuing new titles after December until a new buyer is found.
