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Summary:

As it had warned, Barnes & Noble released a disappointing earnings report Thursday morning. Nook sales were down 26 percent over the previous year, despite the launch of new tablets.

Nook Digital Shop
photo: Barnes & Noble

Barnes & Noble had warned investors that its third-quarter Nook earnings would be disappointing. The earnings report was released before the market opened Thursday morning, and indeed, Nook revenues — consisting of devices and digital content — were down 26 percent, to $316 million, despite the fact that Barnes  & Noble released two new tablets during the year. The company attributed the decline primarily to lower device sales. Digital content sales rose slightly, by 6.8 percent. Nook EBITDA losses were $190 million, compared to $83 million a year ago.

The company’s overall revenues for the third quarter of fiscal year 2013 were $2.2 billion, down 8.8 percent over last year. The company saw losses of $6.1 million, or -$0.18 per share, compared to earnings of $0.71 per share a year ago.

Today’s earnings come a few days after B&N’s founder, chairman and largest stockholder, Leonard Riggio, offered to buy the chain’s 689 retail stores and take them private. So how are those stores doing? Not well, but not as badly as Nook is doing. Over the holidays, Barnes & Noble bookstore chain saw sales down at its physical stores and at BN.com as well as in the Nook segment. For the quarter, retail sales were $1.5 billion, down 10.3 percent over last year, “attributable to a 7.3% decline in comparable store sales, store closures and lower online sales.” Core comparable store sales were down 2.2 percent. The company did not break out sales at BN.com.

In response to the problems at Nook, Barnes & Noble said in the earnings release that Nook “is calibrating its business model and has implemented a cost reduction program that the company projects will significantly reduce Nook’s expenses.” As a reminder, Nook is the segment of the business that’s supposed to be doing well: Barnes & Noble spun it off, along with the college bookstores, into a subsidiary called Nook Media last year, with investments from Microsoft and Pearson. For fiscal year 2013, the company said it expects Nook Media revenues to be $2.5 billion. Previously, it had estimated revenues of $3 billion for the segment.

In a statement, B&N CEO William Lynch said the company has “taken significant actions to begin to right size our cost structure in the Nook segment, while also taking a large markdown on Nook devices in order to enhance our ability to achieve our estimated sales plans in subsequent quarters.” Lynch said Nook “remains committed” to the tablet and e-reader business, likely in response to a New York Times article earlier this week that cited an unidentified source who said Barnes & Noble would “move away” from building devices.

Lynch also said, “Without question, our bookstores have made a significant contribution to Nook’s success over the past three years. And, in turn, our award-winning line of Nook’s products have proven to be a strong driver of traffic to our stores.”

Barnes & Noble is holding an investor call at 10 a.m. ET, and we will be on the call.

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  1. Michael C. Simonelli Thursday, February 28, 2013

    In my refresh of posts from blogs I follow, this post re B&N sits adjacent to one regarding iTunes University hitting the 1B download mark, and another regarding improvements in networks to move patient records. In addition to looking at the cost side of things, hoping B&N is looking at the opportunity side as well.

  2. I’d like to like the nook especially the glow light one but they just are’t smooth when I play with them in store. I’m certainly not gonna spend money in them. BN is in the business of selling books. They shouldn’t be trying to profit off electronics as apple does. They need to almost give basic nooks away for free. Or give you a gift card for an equal amount of books based on how pricey of a nook you get. You want people coming to you for their book reading, and as it is, trying to profit off the nook is a huge barrier to entry. Give me a free ink reader and I’m far more likely to get hooked on getting my books through that platform.

  3. Michael Nielsen Thursday, February 28, 2013

    One assumes this would be a death knell for the utterly incompetent management that has been running B&N for the past few years. Their Digital folks have only a glancing interest in the book business (see William Lynch’s own comments about his reading tastes – or lack thereof) and the crew running their bricks & mortar business is even worse. None of them have a background in book retailing, and the inevitable result has been a mass exodus of customers from their stores — even in the absence of their one-main-competitor, Borders. Walk into any of their stores and just try finding the books! Instead of getting rid of the books out of a paranoia of being “showroomed”, maybe they should try offering some deals to entice their customers to buy from them. Instead they’ve followed the same tack of offering higher-priced, none-core inventory as JC Penney attempted, and with similarly disastrous results. It’s way past time for the board to step in and remove these nitwits before it’s too late for the chain.

  4. Gene E. Moore, SPHR Friday, March 1, 2013

    Aloha!
    Think I have the best of two worlds. Originally had one of the first generation Nooks.
    Unfortunately not use to having it, ended up leaving it on a plan. Did the next best thing, and downloaded the Nook app for my smart phone.
    Got a refurbished Nook tablet for Christmas. And was in heaven able to now read my Nook book’s on a larger screen.
    Then I found I could purchase a microSD card from N2A preloaded with Android Jellybean to give myself an Android Tablet without voiding any existing Nook warranties or altering the Nook software in any way.
    Even have found a way to get myself a small keyboard to use.
    Just my two coconuts worth
    Mahalo, Gene
    AKA Bro Kini

  5. What does calibrating mean?

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