Mixed Signals From B&N

Barnes & Noble’s second-quarter results were full of mixed signals about how the company itself is doing as well as for the bookselling and publishing markets. During the quarter, B&N cut its net loss in half and saw EBITDA rise 21%, to $56 million. Sales, however, slipped 0.6%, with declines in its retail trade stores and college stores offsetting gains at BN.com. And while B&N improved its bottom line in the quarter, executives said that continued investments in technology as well as higher advertising and promotional spending for the Nook line of devices would result in full-year EBITDA coming in at the lower part of its previously announced $210 million–$250 million range.

The big revenue driver, of course, was Nook and digital content sales, which jumped 85%, to $220 million. The educational toys and games segment also did well in the period, and the category is becoming a meaningful part of the trade store’s business, CEO William Lynch said.

The sale of toys and games, as well as other nonbook items, was cited as the primary factor in boosting EBITDA at the trade stores (as well as the absence of $10 million in litigation and proxy costs recorded in last year’s second quarter). Sales of print books declined in the quarter, but B&N said that the decline slowed as the quarter wore on, and more Borders customers began making the transition to B&N stores. Interim CFO Allen Lindstrom noted that customer traffic was up in the quarter, though the average ticket was flat. Still, Lynch said that with Borders’s going-out-of-business sales over, B&N has a more favorable view of its core retail business, adding that B&N is on track to add between $150 million and $200 million in extra sales because of Borders’s bankruptcy. Comparable store sales for the Thanksgiving holiday weekend were encouraging, up 10.9%, and B&N said it expects to have a good holiday season.

Barnes & Noble Second-Quarter Segment Results (In millions)

SALES

EBITDA