Barnes & Noble’s second quarter report was a bit of a mixed bag. The company reported a 0.6% decline in total revenue for the period ended October 29, to $1.89 billion, but its net loss was cut to $6.6 million from $12.6 million in the comparable period in fiscal 2011. The company said, however, that more investment in “customer acquisition activities” plus continued investment in technology would result in EBITDA for the full fiscal year coming in at the low part of its range of $210 million to $250 million. EBITDA in the second quarter was up 21%, to $56 million.
The performance among its operating groups showed Barnes & Noble retail store sales decreasing 1% from $931 million to $918 million, with comparable sales down 0.6%. Physical book sales declined, offset by increases in Nook products and were positively affected by the liquidation of the remaining Borders stores. Comparable store sales improved each month throughout the quarter, B&N said. In a conference call with analysts, CEO William Lynch said the company is on track to generate an extra $150 million to $200 million in store sales due to the closing of Borders. He added that since the closing of its main rival and overall consolidation of the bookselling business, B&N has a "more favorable view" of its trade stores for both the near and long term. During the quarter, the decline in book sales became less severe, though B&N finished the period with less print book inventory compared to a year ago while inventory of Nook devices was up. Stronger performaning categories in the stores were educational toys and games (second-fastest growing segment behind the Nook Tablet, Lynch said), cafe, juvenile and newstand.
There was little store activity in the quarter with B&N closing just one trade outlet.
BN.com sales increased 17% in the quarter, to $206 million with comp sales up 38%. The increase was driven by continued growth of digital content sales and purchases of Nook devices. B&N explained that BN.com comparable sales reflect the actual selling price for e-books sold under the agency model rather than solely the commission received.
Total sales of all Nook related products, including e-books, rose 85% in the quarter to $220 million as sales of digital content tripled. B&N still expects to generate $1.8 billion in Nook and digital content sales for the full fiscal year.
Barnes & Noble College had the worst performance with sales declining 4%, to $768 million, due to a shift from selling new and used textbooks to lower priced, higher margin textbook rentals. Comparable store sales increased 0.4%, and Lynch said the division "delivered its number."
The company said it solid sales at B&N trade stores over the Thanksgiving weekend with comp sales up 10.9% and is expecting a good holiday season. Sales of Nook devices over the weekend were four times that of a year ago.
Commenting on its forecast, Lynch said B&N's goal is to generate steady EBIDTA growth while continuing to make digital investments.
