Bloomberg News

Barnes & Noble Falls After Second Straight Nook Sales Drop

August 21, 2012

Barnes & Noble Inc. (BKS:US), the U.S. bookstore chain working to navigate a shift to digital content, fell after posting a second straight quarterly sales decline in Nook devices.

The shares declined (BKS:US) 3.9 percent to $11.87 at the close in New York. Barnes & Noble has dropped 18 percent this year.

The company has been losing money (BKS:US) as it develops and markets its Nook tablet computers and e-books to take advantage of a growing preference for digital books. Sales in the Nook unit, including tablets, e-books and applications, were little changed at $192 million in the fiscal first-quarter, hurt by a drop in demand for devices, after a 34 percent gain last year.

“This is supposed to be their growth business and growth is decelerating,” Michael Souers, an analyst for Standard & Poor’s in New York, said in an interview.

Barnes & Noble provided sales of the Nook for the first time with its fiscal fourth-quarter results, when the division’s revenue fell 10 percent amid declining device sales.

A 23 percent drop in average selling prices and production delays with the Nook Simple Touch with Glowlight, a version of its black-and-white e-reader, hurt device sales last quarter. Sales of digital content, including e-books and applications, rose 46 percent after a gain of 65 percent in the previous quarter, New York-based Barnes & Noble said today in a statement.

Loss Narrows

The net loss in quarter ended July 28 narrowed to $41 million, or 78 cents a share, from a loss of $56.6 million, or 99 cents, a year earlier, Barnes & Noble said today. Analysts projected a loss of 90 cents a share, the average of estimates (BKS:US) compiled by Bloomberg.

While revenue from what it considers its growth unit were little changed, so-called same-store sales, a key measure of a retailer’s growth because new stores are excluded, rose 4.6 percent. That marked a third straight gain.

Excluding revenue from Nook products, sales at bookstores rose 7.6 percent, helped by continuing to gain customers from the liquidation of rival Borders Group Inc. last year.

“The retail was very solid,” John Tinker, an analyst for Maxim Group LLC in New York who recommends buying Barnes & Noble shares, said in an interview. “It suggests the book business isn’t dead.”

Another boost came from the “Fifty Shades of Grey” trilogy of erotic romance novels by E.J. James that has held the top three spots on the New York Times fiction bestsellers list for at least 19 weeks.

Outside U.S.

Total revenue (BKS:US), which includes the college bookstore unit, rose 2.5 percent to $1.45 billion. Analysts projected $1.49 billion, the average of estimates compiled by Bloomerg.

The company is working to boost sales in the Nook unit by expanding outside the U.S. The bookseller said yesterday that it would open a website in the U.K. in the next few months to sell digital books and Nook devices would soon appear in retailers there.

Barnes & Noble will also look to grow overseas through a proposed partnership with Microsoft Corp. that was announced in April. Under the deal that is expected to close in the next few months, Microsoft will invest $300 million for an 18 percent stake in a Nook subsidiary that may be spun off into a standalone company. It has also agreed to spend $305 million over five years on revenue sharing and capital expenditures.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net


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Companies Mentioned

  • BKS
    (Barnes & Noble Inc)
    • $22.88 USD
    • -0.62
    • -2.71%
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