June 22, 2016 Last Updated 2:31 pm

Barnes & Noble reports $24.4M loss in full year earnings report

NOOK sales fell 20 percent, though retail sales were only down 2.2 percent in the fourth quarter, with ‘core’ comparable store sales, which exclude NOOK, down 1 percent

The big brick and mortar bookseller Barnes & Noble this afternoon reported its fourth quarter and full year earnings, reporting a loss for the full year and a 1 percent decline in store sales.

The last year has been trying, to be sure, with rumors that the company may not make it, despite a new chief executive trying to broaden the company’s store offerings.

As for NOOK sales… well, they fell again, down another 20 percent. The segment was down 27 percent for the full year.

One would lament the continued declines, and the poor prospects for B&N, but communications with the company have always seemed like executives there were living in another world, unable to admit to their problems with their eBook and tablet efforts, and especially their online sales efforts.

Just recently, Alex Shephard tried to convince New Republic readers that the loss of B&N would be bad for not only publishers and authors, but for American culture, as well.

“There’s more than a little irony to the impending collapse of Barnes & Noble. The mega-retailer that drove many small, independent booksellers out of business is now being done in by the rise of Amazon. But while many book lovers may be tempted to gloat, the death of Barnes & Noble would be catastrophic—not just for publishing houses and the writers they publish, but for American culture as a whole.”

Shephard doesn’t provide much of a valid argument for how losing B&N would adversely effect American culture – some would argue any further decline an impossibility – but he has a point about how it would hurt the big publishers,

“The retailer provides much of the up-front cash publishers need to survive, in the form of initial orders. Most independent bookstores can’t afford to buy many books in advance; a single carton of 24 books would represent a large order,” Shephard said.

Of course, I know quite a number of digital publishing pros who would not lament the end of the big publishing houses, and so if B&N going under would facilitate that, well they might be all for it.

Here is Barnes & Noble’s fourth quarter 2016 earnings announcement:


NEW YORK, NY – June 22, 2016 — Barnes & Noble, Inc. today reported sales and earnings for its fiscal 2016 fourth quarter and full-year ended April 30, 2016.

Retail sales, which include Barnes & Noble stores and BN.com, were $850 million for the quarter and $4.0 billion for the full year, decreasing 2.2% and 1.9%, respectively. Comparable store sales declined 0.8% for the quarter and were flat for the full year, in-line with Company guidance. “Core” comparable store sales, which exclude sales of NOOK products, declined 0.8% for the quarter, while increasing 0.4% for the full year, slightly below expectations of an approximate 1% increase. Sales for both the quarter and the year were also impacted by store closures and lower online sales.

NOOK sales, which include digital content, devices and accessories, were $42.0 million for the quarter and $191.5 million for the full year, decreasing 20.0% and 27.4%, respectively, due primarily to lower device and content sales.

Consolidated sales were $877 million for the quarter and $4.16 billion for the year, decreasing 3.7% and 3.1%, respectively, as compared to the prior year.

Retail incurred an operating loss of $34.9 million for the quarter and an operating profit of $113.3 million for the year. NOOK generated an operating loss of $23.1 million for the quarter and $98.6 million for the year.

The consolidated fourth quarter net loss from continuing operations was $30.6 million, or $0.42 per share, compared to a loss from continuing operations of $3.0 million, or $0.12 per share, in the prior year. Fiscal 2016 consolidated net earnings from continuing operations were $14.7 million, or $0.05 per share, compared to net earnings from continuing operations of $32.9 million, or $0.15 per share, in the prior year.

For the fourth quarter, Retail incurred an EBITDA loss of $11.1 million, which includes a previously disclosed $20.9 million pension settlement charge related to the termination of the Company’s pension plan. Excluding this charge, Retail EBITDA would have been $9.8 million during the quarter, a decline of $23.3 million versus the prior year, primarily on lower sales, increased promotional activity and higher store wages and benefit costs.

For the full year, Retail generated EBITDA of $215.2 million, inclusive of $35.2 million of charges, including the $20.9 million pension charge noted above, a $10.5 million executive severance charge related to the Barnes & Noble College spin-off and a $3.8 million publishing contract impairment. Excluding these charges, Retail EBITDA would have been $250.4 million for the year, declining $67.3 million primarily on lower sales, increased advertising, higher store wages and expense deleverage.

Fourth quarter NOOK EBITDA losses were $14.9 million, which included approximately $4.0 million of expenses incurred to further rationalize the cost structure of the business. These expenses include transitional costs to outsource certain technology functions, consulting fees, Retail integration costs, and expenses to exit the U.K., apps and video businesses. Excluding these items, NOOK EBITDA losses would have been consistent with the third quarter.

Full year NOOK EBITDA losses were $64.7 million this year as compared to $83.9 million a year ago, a 23% decrease as the Company continues to focus on cost rationalization efforts.

On a consolidated basis, the fourth quarter EBITDA loss was $26.0 million, which includes the $20.9 million pension settlement charge. Excluding the charge, the fourth quarter consolidated EBITDA loss would have been $5.1 million. For the full year, consolidated EBITDA was $150.5 million, which includes the $35.2 million of charges noted above. Excluding the charges, consolidated EBITDA would have been $185.7 million for the full year.

Excluding the charges noted above, the consolidated fourth quarter net loss from continuing operations would have been $17.8 million, or $0.24 per share, and fiscal 2016 consolidated net earnings from continuing operations would have been $36.2 million, or $0.35 per share.

Return of Capital

During the quarter, the Company returned $21.5 million in cash to its shareholders, including $11.3 million in dividends and $10.2 million through share repurchases. The Company acquired approximately 964,000 shares at an average price of $10.61 during the quarter under its share repurchase program.

Outlook

“As we look ahead to fiscal 2017 and beyond, we are focusing on executing a number of initiatives to grow bookstore and online sales, reduce Retail and NOOK expenses and grow our Membership base,” said Ron Boire, Chief Executive Officer of Barnes & Noble, Inc. “We believe our marketing, merchandising and Membership initiatives will lead to increased traffic and conversion in our stores. We are also excited about our plans to open four new concept stores opening later this year, beginning with the first store opening this October in Eastchester, NY. We look forward to discussing these initiatives at our Investor Day.”

For fiscal year 2017, the Company expects comparable bookstore sales to be approximately flat to an increase of approximately 1%. The Company also expects full year consolidated EBITDA to be in a range of $200 million to $250 million, with Retail EBITDA of $240 million to $280 million and NOOK EBITDA losses declining to a range of $30 million to $40 million, including previously announced transitional costs.

BN-16-580

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