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Barnes & Noble shares slide as Q4 loss much wider than anticipated; to exit tablet making business


Shares in Barnes and Noble  (NYSE:BKS) took a major slide Tuesday as the retailing giant released some lackluster figures for its fourth fiscal quarter, including a loss that was twice as wide as analysts estimated, with the New York-headquartered bookseller blaming the NOOK, saying it plans to exit the tablet manufacturing business altogether. 

For the quarter to April 27, the retailer, which is considering breaking itself up, posted a net loss of $118.6 million, or $2.11 per share, as compared to the prior year net loss of $56.9 million, or $1.06 per share. 

Fourth quarter revenue came in at $1.28 billion, down from the year ago figure of $1.38 billion, a 7.4 per cent drop. 

Results were down on analyst estimates, which called for a loss of 99 cents per share on revenue of $1.33 billion.

The retail segment, made up of the Barnes & Noble bookstores and BN.com businesses, posted EBITDA of $51 million, down from the $67 million recorded the year before, a decrease of 23.9 per cent, on revenues of $948 million for the quarter, a 10 per cent drop from the year ago figure of $1.05 billion.

The drop in sales was attributable to decreases in comparable store sales of 8.8 per cent for the quarter, as well as store closures and lower online sales. 

Lower NOOK unit volume and a stronger title lineup in the prior year period including The Hunger Games and Fifty Shades of Grey trilogies contributed to the decrease. Core comparable bookstore sales, which exclude sales of NOOK products, decreased 5.8 per cent in the quarter, the company said. 

The College segment posted EBITDA of $3.8 million, up from the flat year ago figure, on revenues of $252 million, an increase of 10.7 per cent from $228 million. Fourth quarter sales were positively impacted by the back-to-school rush season, which extended into the quarter. 

Comparable College store sales, which reflects the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period, increased 7.5 per cent for the quarter, 

The NOOK segment, which consists of the company's digital business (including devices, digital content and accessories), had revenues of $108 million for the quarter, a decrease of 34 per cent. The unit recorded a loss of $177 million, widening the $77 million loss recorded in the same quarter a year ago by almost 130 per cent.

Digital content sales decreased 8.9 per cent due in part to the device sales shortfall as well as the comparison to the The Hunger Games and Fifty Shades of Grey trilogies a year ago.    

The company said it plans to curtail the losses incurred by the NOOK segment by getting out of the tablet-making business altogether. While the company plans to continue to design eReading devices and reading platforms, production is to be turned over to a third party partner for the competitive color tablet market.

“Thus, the widely popular lines of Simple Touch and Glowlight products will continue to be developed in house,” said a company statement released with the figures, “and the company’s tablet line will be co-branded with yet to be announced third party manufacturers of consumer electronics products.”

“We are taking big steps to reduce the losses in the NOOK segment, as we move to a partner-centric model in tablets and reduce overhead costs,"  said chief executive officer William Lynch. "We plan to continue to innovate in the single purpose black-and-white eReader category, and the underpinning of our strategy remains the same today as it has since we first entered the digital market, which is to offer customers any digital book, magazine or newspaper, on any device.”

The company said it expects a decline “in the high-single digits on a percentage basis” in fiscal 2014 comparable bookstore sales, as well as a smaller decline in college same-store sales. 

Shares in the company were trading well down the day of the release of figures, hitting as low as $15.48, a drop of over 15 per cent from a previous close of $18.82 per share. 

Quick facts: Barnes & Noble Education

Price: 1.81 USD

Market: NYSE
Market Cap: $87.42 m

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