Total revenue dropped 4% in the quarter ended October 29 at Barnes & Noble, compared to the similar period a year ago. Although revenue declined 19.5% in the company’s Nook division, in the conference call with analysts to discuss the results, the focus was on the 3.5% decline in B&N’s retail segment.
Chairman and CEO Len Riggio said that the company was not happy with the 3.2% decline in comparable store sales in the period, which was the biggest factor in the retail sales drop. Comp store sales of books fell 3% in the quarter, due in part to lower sales of adult coloring books.
As he has done for a number of months, Riggio said that the presidential election was a major factor in keeping store traffic down, which in turn suppressed sales. He explained that an analysis of daily sales patterns found that comp sales were hurt the most during prime-time television viewing but were close to normal in other parts of the day. Riggio said that while he expects sales to improve before and through the holidays, he acknowledged that the company doesn’t yet know where the “new normal” for sales will fall.
One reason for Riggio’s cautious optimism for the holidays and beyond is that B&N has added back inventory and store staff and will make strategic investments in personnel during the holidays. Significant reductions in inventory and staff made by former CEO Ron Boire earlier this year contributed to his ouster in August.
A bright spot for B&N is that the long-awaited turnaround of BN.com may have begun. CFO Allen Lindstrom said that sales on the site rose 12.5% in the quarter, compared to the same quarter last year—the first time online sales have increased in “quite a while.” He credited investments made in the site since its troubled relaunch in summer 2015 for leading to the sales turnaround.
Despite the decline in total sales, B&N was able to reduce its operating loss from $55.6 million in the quarter ended Oct. 31, 2015, to $29.3 million in the most recent period. The most dramatic improvement came in the Nook division, where the loss was cut by over $21 million, as B&N continued to rightsize the business. Riggio said that the company is in “the final stages” of rationalizing the Nook unit, which will allow it to focus even more on its retail business.
B&N is not exiting the digital market altogether, and earlier in November the company announced that it will begin selling a $49.99 Nook tablet on Black Friday. Riggio said that preorders for the device were strong and that he hopes the tablet will sell out over the holidays.
For the first half of fiscal 2017, total B&N revenue fell 5.4%, to $1.77 billion, compared to the first six months of fiscal 2016. B&N said that it still expects comp store sales to fall in the low single digits for the full fiscal year, although executives do expect comps in the second part of the fiscal year to improve over the first half.
Barnes & Noble Segment Results, Second Quarter, Fiscal 2016–2017
($ in millions)
| 2016 | 2017 | Change | |
|---|---|---|---|
| Sales | |||
| Retail | $860.7 | $830.7 | -3.5% |
| Nook | $43.5 | $35.0 | -19.5% |
| Eliminations | ($9.5) | ($7.2) | – |
| Total | $894.6 | $858.5 | -4.0% |
| Operating Loss | |||
| Retail | ($25.7) | ($21.1) | – |
| Nook | ($29.9) | ($8.2) | – |
| Total | ($55.6) | ($29.3) | – |
Source: Barnes & Noble, Publishers Weekly.
