December 4, 2014 Last Updated 10:16 am

NOOK division proves a drag on Barnes & Noble earnings; Microsoft exits investment

The book seller Barnes & Noble today reported its second quarter earnings for its 205 fiscal year. The company reported lower retail sales, as well as a sharp decline in revenue from its NOOK division. Earnings were down 10.4 percent, though both its retail and college divisions remain in the black.

B&N also said that its commercial agreement with Microsoft has come to an end. Microsoft invested $300 million for a share of the NOOK business. But now B&N has bought out Microsoft for $62.4 million, plus 2.7 million shares of common stock, according to the separate 8-K report.

“Retail sales continued to benefit from improving physical book industry trends coupled with our own merchandising initiatives, while our College bookstores comparable sales improved on favorable textbook sales trends and higher merchandise sales,” said Michael P. Huseby, Chief Executive Officer of Barnes & Noble, Inc.

“Separately, today’s announcement on the restructuring of the NOOK Media agreements will enable the Company to further rationalize the NOOK business and provide a clearer path for the potential separation of our Retail and NOOK Media businesses.”

The NOOK segment, which includes both devices and digital sales, saw its revenues decrease 41.3 percent to $64 million for the quarter. Device and accessories sales were $18.7 million, a decrease of 63.7 percent from the sale quarter a year ago. Digital content sales were $45.2 million, a decline of 21.2 percent, which the company said was due “primarily to lower device unit sales.”

Barnes & Noble stock, which closed yesterday at $22.24, is trading sharply down in early morning trading – as much as 13 percent, but is recovering as the morning progresses and is now back over $20 a share.

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