November 26, 2013 Last Updated 10:39 am

Barnes & Noble reports decline revenue, steep fall in NOOK content and tablet segment

Digital content sales were $57 million for the quarter, a decline of 21.2% compared to a year ago, due to lower average selling prices and lower device unit sales

In a separate press release Barnes & Noble is saying that they have teamed up with Samsung to make the NOOK App for Kids “the only reading app on the new Samsung Galaxy Tab 3 Kids.” One assumes that what is meant by this is that the app comes pre-installed on the tablet, not that other apps can not be downloaded and installed on the tablet.

“This new relationship between Barnes & Noble and Samsung highlights both companies’ commitment to children’s literacy and learning,” said Mike Saturnia, Vice President and General Manager of NOOK Sales & Business Development. “By making our NOOK App for Kids available on the new Samsung Galaxy Tab 3 Kids device, we are giving parents a powerful tool to encourage their children to digitally read, discover and learn in a safe environment.”

Here is the B&N earnings release:


Press Release:

NEW YORK, NY – November 26, 2013 — Barnes & Noble, Inc. today reported sales and earnings for its fiscal 2014 second quarter ended October 26, 2013.

Second quarter consolidated revenues decreased 8.0%, to $1.7 billion, compared to the prior year. Second quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased 13.7% to $76 million, as compared to a year ago.

“During the second quarter, Barnes & Noble grew earnings through improved margins and reduced expenses, while also completing another successful College rush season,” said Michael P. Huseby, President of Barnes & Noble, Inc. and Chief Executive Officer of NOOK Media. “The company is focused on executing its plans for the holiday season and our booksellers are prepared to welcome holiday shoppers and recommend thoughtful gift ideas for everyone on their list. We have a terrific book title line-up this holiday season, a leading assortment of educational Toys & Games and a full selection of NOOK devices, including our recently released new NOOK GlowLight.”

BN-Q2-chart

Retail

The Retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, had revenues of $921 million for the quarter, a decrease of 7.5% from the prior year. The sales decrease, which was in-line with company expectations, was attributable to a comparable store sales decrease of 4.9% for the quarter, store closures and lower online sales. “Core” comparable bookstore sales, which exclude sales of NOOK products, decreased 3.7% for the quarter on lower store traffic and comparisons to the Fifty Shades of Grey trilogy a year ago.

Retail generated EBITDA of $37 million in the quarter, increasing 21.2% as compared to a year ago as the sales decline was offset by strong expense management, including higher store productivity.

College

The College segment had revenues of $738 million, decreasing 4.6% compared to a year ago. Comparable College sales decreased 3.6% for the quarter, impacted by a higher mix of lower priced used textbook rentals and lower textbook sales, partially offset by higher general merchandise sales. The second quarter includes the fall back to school rush season. Comparable College store sales reflect the retail selling price of new or used textbooks when rented.

College EBITDA declined $3 million as compared to a year ago to $84 million. The decline is primarily attributable to higher textbook rental volume, where revenues received are deferred and amortized over the rental period, which generally spans the term of the semester. The company also continued to invest in digital product development. These factors were partially mitigated by increased store count, as well as higher margins associated with textbook rentals and a greater sales mix of general merchandise.

NOOK

The NOOK segment, which consists of the company’s digital business (including digital content, devices and accessories), reported revenues of $109 million for the quarter, decreasing 32.2% from a year ago. Digital content sales were $57 million for the quarter, a decline of 21.2% compared to a year ago, due to lower average selling prices and lower device unit sales. Device and accessories sales were $51 million for the quarter, a decrease of 41.3% from a year ago, due to lower unit selling volume and lower average selling prices.

Despite the sales decline, NOOK EBITDA losses decreased $6 million as compared to a year ago to $45 million on lower device markdowns and reduced expenses.

Consolidated Results

Consolidated second quarter net earnings were $13.2 million, or $0.15 per share, compared to net earnings of $0.5 million, or a loss of $0.07 per share, in the prior year.

Guidance

The company reaffirms its previously issued full-year guidance, in which it expects Retail comparable store sales to decline in the high single digits, Core Retail comparable bookstore sales to decline in the low- to mid-single digits and College comparable store sales to decline in the low single digits.

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