With sales from its retail trade stores off 2.9% in the second quarter ended October 27, total revenue at Barnes & Noble dipped 0.4%, to $1.88 billion, but EBITDA (earnings before interest, taxes, depreciation and amortization) increased 15.6%, to $64.8 million. Sales in B&N’s Nook division rose 5.6%, to $160.3 million and college revenue inched up 0.4%, to $773.0 million. The net loss was $575,000 in the period compared to $6.6 million in the second quarter of fiscal 2012.
The decline in its retail segment was due to flat comparable store sales, store closures and lower BN.com sales. B&N noted that during the quarter, the company began to cycle against the favorable impact of the Borders liquidation last year. Store sales were actually hurt by the sale of Nook devices with the company noting that core comparable bookstore sales, which exclude sales of Nook products, increased 1.8% for the quarter. Book comps rose 1.2% in the quarter and comps of educational toys and games increased 32%. The decline in Nook devices was attributed to an 18% decline in the average selling price as well as a drop in units, although CEO William Lynch stressed that overall unit sales rose as business through other retailers increased. B&N did not open or close any trade stores in the quarter and opened two in the current quarter.
In the Nook segment, which consists of the company’s e-readers, digital content and accessories, the sales increase was attributed to a 38% increase in digital content sales (digital books, digital newsstand, and apps). The new Nook HD and Nook HD+, began shipping after the close of the company’s fiscal second quarter, and sales from the launch of those products will be reflected in the current fiscal third quarter. In a number watched closely by analysts, B&N reported that Nook segment’s EBITDA loss rose 1% as margin improvements were offset by higher investments primarily in product development and international expansion.
Comp store sales fell 0.5% in the college segment, offset by new store growth. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period. Lynch said as more colleges look to outsource its bookstore operations because of increased sales of digital products it will have its largest increase in new store accounts this year. In the quarter it opened 11 new stores and closed four.
Lynch said B&N was encouraged by the start of the holiday season in both its trade bookstore and digital businesses. According to the company, Nook unit sales doubled over the four-day Black Friday weekend, across all channels, with growth driven by increased promotional activity at channel partners, particularly Walmart and Target. Retail Core comparable sales at its stores, which exclude sales of digital products, slightly declined over the holiday weekend, in-line with company expectations.
