Revenue fell in all three of Barnes & Noble’s operating groups for the second quarter ended October 26, 2013, but the retailer managed to post a 13.7% increase in EBITDA. Total sales dropped 8.0%, to $1.73 billion, in the quarter compared to the second quarter of fiscal 2013, but EBITDA rose to $75.7 million from $66.5 million. The company cited lower expenses for the improved earnings. The company posted net income of $13.2 million compared to net income of $501,000 in last year’s second quarter.
B&N’s Nook division had the largest revenue decline in the quarter, with sales dropping 32.2%, to $108.7 million. The overall decline was attributed to a 21.2% decline in digital content sales, to $57 million, “due to lower average selling prices and lower device unit sales,” B&N said. Device and accessories sales plunged 41.3%, to $51 million, for the quarter, due to lower unit selling volume and lower average selling prices. In the conference call, Mike Huseby, president of Barnes & Noble Inc. and CEO of Nook Media, said the company will look for further ways to "rationalize" the Nook business, but said the priority for the holiday season is to continue to sell its device inventory (including HD and HD+ devices) and to "reverse" the decline in content sales. Huseby said B&N is well aware that it needs to stay in the hardware business if it wants to grow its content business. He said after the holidays, B&N will determine its next steps in the device field, although he stressed that the company "is in the device business to stay."
In trade retail, sales fell 7.5%, to $921 million, which B&N said was due to a comp sales decline of 4.9%, store closures and lower online sales. Excluding Nook product sales, comps were down 3.7% on lower store traffic and comparisons to Fifty Shades. Mitch Klipper said sales of books was "close to" the 3.7% decline in core comps, though he said some other categories did better than books in the quarter. In the quarter, B&N opened two stores and closed 3, finishing the period with 673 trade outlets. Klipper said he was encouraged by the depth of titles available for the holidays and called B&N's "Discovery Friday (held November 22) a success.
College sales fell 4.6%, to $737.5 million, with comp sales down 3.6% in the quarter. The sales decline was attributed to a higher mix of lower priced used textbook rentals and lower textbook sales, partially offset by higher general merchandise sales.
B&N “reaffirmed” its previously issued full-year guidance, in which it expects trade retail comparable store sales to decline in the high single digits, (with “core” retail comp sales to decline in the low- to mid-single digits), and college comp store sales to decline in the low single digits.
For the first half of fiscal 2014, total sales were down 9%, to $3.06 billion, and the net loss was $73.8 million compared to $39.3 million in the first six months of fiscal 2013.
