Barnes & Noble (s BKS) reported second-quarter earnings for the period ending October 27 before the bell on Thursday morning. Revenues totaled $1.9 billion on losses of $0.04 a share — down 0.4 percent from a year ago, but slightly better than analyst expectations. Retail sales — consisting of bricks-and-mortar bookstores and BN.com — were $996 million, down three percent from this time last year. B&N’s college bookstores had revenues of $773 million, up 0.4 percent over last year.
The Nook segment — including devices, digital content and accessories — had revenues of $160 million, up 6 percent over last year, and the company said digital content sales (ebooks, apps and newsstand) were up 38 percent over last year. Also, “Nook unit sales doubled over the four-day Black Friday weekend, across all channels, based on information provided by our channel partners on a sell-through basis compared to the similar period last year. The growth was driven by increased promotional activity at channel partners, particularly Walmart and Target.” (The non-statistic echoed Amazon’s announcement earlier this week that Kindle device sales “more than doubled last year’s record” over the holiday weekend, but neither Amazon nor Barnes & Noble released actual device sales numbers. Barnes & Noble’s announcement could also be seen as a jab at Amazon, since Walmart (s WMT) and Target (s TGT) recently announced that they will no longer carry Kindles.)
CEO Lynch: Fast growth in self-publishing
In an investor call following the earnings report, Barnes & Noble CEO William Lynch said “growth in ebooks moderated during the quarter” not just for Barnes & Noble but for publishers as well, and “I’m almost sure for Amazon.” This is normal, he said, and he expects ebook sales to grow again after the holidays when consumers receive new devices. Lynch said the fastest-growing category of digital content was “self-published areas.”
In response to a question about Barnes & Noble’s ebook market share, Lynch said, “Unlike the past quarters, we don’t have confirmation that we grew share.” But he said the company “almost certainly” maintained a 25 percent share of ebooks sales. (Amazon’s ebook market share is estimated at 55 to 60 percent, with Apple (s aapl) taking about 10 percent and other retailers splitting the remaining five to ten percent.)
Lynch also commented on discounting of HarperCollins titles following the publisher’s settlement with the Department of Justice in the ebook pricing lawsuit. HarperCollins was the first publisher to negotiate new contracts with retailers, which allow the retailers to discount HarperCollins ebooks. (The other two settling publishers, Hachette and Simon & Schuster, still haven’t negotiated new contracts. Despite the new discounting, HarperCollins has not seen big changes in sales, Lynch said. “That was a big epiphany…There wasn’t much elasticity. If someone wants to buy a John Grisham book [John Grisham is a Random House author, but whatever] in an electronic format, they’re going to pay $11.99 or they’re going to pay $10.99.” Barnes & Noble sees that as good news, because it suggests that readers are more concerned about author brands than about price. But the question is what happens if Amazon deeply discounts the well-known author brands and Barnes & Noble can’t match Amazon prices.
Barnes & Noble and Microsoft (s MSFT) recently finalized a partnership to spin off B&N’s Nook and college businesses into a separate company, Nook Media. Microsoft is investing $300 million in Nook Media and will hold a 17.6 percent stake. Barnes & Noble is also expanding its Nook business into the U.K. Lynch acknowledged that Amazon holds “something north of a 90 percent share” of ebook sales in the U.K., but said Barnes & Noble is “in the U.K. for the long haul” and will be “a strong number two there over time.”
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