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Bad earnings for Barnes & Noble: Nook revenues plunge 20%; Riggio won’t take stores private

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In the past quarter, Barnes & Noble’s CEO resigned, and the company announced it would stop manufacturing tablets in-house as a way to cut heavy losses in the Nook division. So investors and others have been waiting for today’s earnings report with a mixture of trepidation and curiosity, and the bookseller’s stock was down Monday ahead of the earnings.

Tuesday morning, they got another bad earnings report: Barnes & Noble’s (s BKS) revenues were down 8.5 percent, to $1.3 billion, and the company saw a net loss of $87 million, or $1.56 per share. Investors had expected a loss of $0.81 per share. Along with the disappointing earnings report comes a hefty dose of confusion about what, exactly, the company plans to do with the Nook business. Barnes & Noble shares were down over 11 percent on Tuesday morning.

The Nook segment, which includes devices, digital content and accessories, fared worse than the company as a whole: Revenues were $153 million, down 20.2 percent from this time last year. Both device sales and digital content sales declined: Sales of devices and accessories were down 23.1 percent over last year, to $84 million, and digital content sales were $69 million, down 15.8 percent.

Barnes & Noble’s retail segment, which consists of its bricks-and-mortar stores and, also fared badly: Revenues were $1.0 billion for the quarter, down 9.9 percent over last year.

B&N will keep making and selling tablets after all?

Michael Huseby, who was appointed CEO of Nook Media after B&N CEO William Lynch resigned, noted in a statement that the company plans to release another Nook device this fall — and also said that the company will continue to sell Nook HD and HD+ tablets and develop both black and white and color devices. This seems to be a complete change in strategy from the announcement less than two months ago that Barnes & Noble would stop manufacturing tablets and focus on e-ink devices:

“Our top priority in our operating strategy is to increase all categories of our content revenue. We are working on innovative ways to sell content to our existing customers and are exploring new markets we can serve successfully. The company intends to continue to design and develop cutting-edge NOOK black and white and color devices. We will continue to offer our award-winning line of Nook products including Nook Simple Touch, Nook Simple Touch with Glow Light, Nook HD and Nook HD+ at the best values in the marketplace. At least one new NOOK device will be released for the coming holiday season and further products are in development. All Nook devices will continue to be backed by world-class pre- and post-sales support in Barnes & Noble stores, as well as ongoing software upgrades and improvements to the digital bookstore service.”

Riggio bails on plan to take stores private

An SEC filing shows that Barnes & Noble chairman Leonard Riggio is abandoning his plan to make a bid for Barnes & Noble’s retail stores and take them private. (At the time of Lynch’s resignation, I’d suggested that spinning off the stores might give them their best chance at survival.) “While I reserve the right to pursue an offer in the future, I believe it is in the company’s best interests to focus on the business at hand,” Riggio said in a statement, and went on to stress the importance of the Nook business: “Right now our priority should be to serve the more than 10 million customers who own Nook devices, to concentrate on building our retail business, and to accelerate the sale of Nook products in our stores, and in the marketplace.”

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

BKS Chart

BKS data by YCharts

7 Responses to “Bad earnings for Barnes & Noble: Nook revenues plunge 20%; Riggio won’t take stores private”

  1. Edmund Charles Davis-Quinn

    The last time I went to a Barnes and Noble I was incredibly unimpressed. A lot of books for full retail, a bored looking staff, and nothing for me to say yes to. Give me a local bookstore like Longfellow Books in Portland, Maine that has both used and new books an a good and engaged sales staff any day. There is really no reason to go to Barnes and Noble over Amazon right now.

  2. Barnes & Noble used to scoff at Amazon and Apple not too long ago. Yet another example of a legacy organization that failed to focus their attention to listening to their customers. The shift in media and content consumption patterns has been a freight train roaring down the track for years. The folks at BN have been in denial that the market would truly adopt the digital content intersection. As BN sat on the sidelines…Amazon became much more than a book seller and Apple dominated the marketplace by creating innovative and exciting products that truly excited their loyal followers. What has happened to BN is that they have been outmarketed by two much stronger and powerful brands. As a result…Unless they change course dramatically ( which I don’t believe will happen)…they will continue to see red ink and slowly decline as those who are loyal to legacy models diminish as a % of the overall consumer marketplace. It didn’t have to be this way. Digital books will be written years ahead that will document the serious mistakes that were made by marketers who refused to embrace the new reality of the consumer market. BN will be a case study.

  3. Sandi York

    B&N exercise in greed has turned around and bit them in the ass. I have a Nook HD and B&N requests money for every little app that are free in most app stores. It turns me off towards the company. They should’ve listened to their patrons.

    • Jim Higgins

      Sandi, several months ago Barnes and Noble DID listen to their patrons and added the Google play store to their HDs and HD+s with a software update. You now have access to over 700,000 apps and all those free ones that you are talking about. Check your software version and make sure you are running the latest update (version 2.1.1) You are now given a choice of where you want to purchase your books, music, apps, and movies. That sounds like the opposite of greed to me ;)