New Barnes & Noble Chief Touts “Omni-Channel” Approach

In remarks accompanying the release of Barnes & Noble’s first-quarter results for fiscal 2016, executives stressed that future growth for the retailer will involve integrating its retail, website, and Nook operations to allow customers to buy books anytime, anywhere, regardless of format. Ron Boire, who was B&N CEO for only two days when the results were released on September 9, said he and his team will pursue an “omni-channel” approach that will blend the company’s different businesses to create a compelling experience for consumers, whether they are shopping at a retail store or online. He praised B&N’s Get Pop-Cultured merchandising initiative, in which the company featured different pop culture themes in July, as a good way to create an experience in stores to draw in customers.

And while Boire said he was very excited about the future of B&N, first-quarter results showed there are a number of challenges to overcome, not the least of which is reversing the continuing slide in revenue. The first-quarter report, for the period ended Aug. 1, 2015, included results from B&N’s college operation, which was spun-off as a standalone business the day after the quarter closed. Excluding college results, revenue at the new B&N—composed of the retail stores and Nook units—fell 3.1% from last year’s first period, to $993.3 million, and EBITDA dropped 55%, to $27.7 million.

In the retail segment, which includes the bookstores and bn.com, the decline in revenue was attributed to store closures (one store was closed in the period), fewer online sales, and fewer warranty reimbursements. (Last year included $7.3 million of warranty reimbursements, compared to $2.5 million this year.) Jamie Carey, who was named chief operating office in July, acknowledged that the rollout of the new website this summer “had some issues,” but that the company was making progress in correcting glitches.

A bright spot for the company was comparable store sales, which rose 1.1% for the quarter; they benefited from growth in nonbook categories led by toys and games, which had a 17.5% increase. Core comparable bookstore sales, which exclude sales of Nook products, increased 1% for the quarter, though comp sales of books fell slightly. The strongest sellers among this quarter’s titles included Harper Lee’s Go Set a Watchman and E.L. James’s Grey; these books helped offset lack of strong young adult titles compared to the prior year, which included titles such as John Green’s The Fault in Our Stars and Veronica Roth’s Divergent series. The goal for the retail group for fiscal 2016 remains to increase core comp store sales by 1%. There are no current plans to add new stores, and the company expects to shut about 13 outlets during the year.

In the Nook group, sales of digital content fell 28% compared to the first quarter last year, to $37 million, and sales of hardware dropped 6.2%, to only $17 million. Carey said B&N will continue to sell devices and pointed to the recent announcement of the release of the Samsung Galaxy Tab S2 Nook. But to grow digital revenue, B&N needs to increase the number of downloads for the Nook reading app and to find a third-party partner to widen the distribution of Nook’s content, Carey said. And while the Nook remains important to B&N’s overall strategy, Carey said B&N has made some reduction in space allotted to Nook displays at some B&N stores and will likely cut some space in other outlets.

Total revenue at Barnes & Noble, including the college stores, fell 1.5%, to $1.2 billion, compared to last year’s first period. The net loss increased to $34.9 million, from $28.4 million.

Barnes & Noble Education released its own earnings report for the first quarter, although the now-separate company was still part of B&N until August 2. Sales rose 5.9%, to $239 million over the first quarter of fiscal 2015, and comparable store sales increased 1.8%. The net loss in the quarter increased slightly, to $26.9 million from $26.2 million last year. The company reported that revenue from product sales rose 6.1% in the period, to $218.7 million, and rental income increased 4.1%, to $20.3 million. CEO Max Roberts said there were no real transition issues in separating from B&N, either in the first quarter or since the company began operating on its own. He noted that B&NE had always had its own systems and merchandising group. “It was a smooth spinoff,” Roberts said.

During the last quarter, sales from general merchandise rose 7.3%, and B&NE added 21 new college stores. Roberts sees plenty of room for growth for the company in taking over more college stores and in expanding its digital business.

Barnes & Noble inc. Segment Results, First-Quarter Fiscal 2015 v. 2016

($ in millions)