NEW YORK--(BUSINESS WIRE)--Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its second quarter ended October 29, 2011.
SECOND QUARTER SALES
Total sales decreased 0.6% as compared to the prior year, from $1.90 billion to $1.89 billion. Barnes & Noble store (“Retail”) sales decreased 1% from $931 million to $918 million, with comparable sales decreasing 0.6%. Physical book sales declined, offset by increases in NOOK products and were positively affected by the liquidation of the remaining Borders stores. Comparable store sales improved each month throughout the quarter.
Barnes & Noble College (“College”) sales declined 4% from $797 million to $768 million, due to a shift from selling new and used textbooks to lower priced, higher margin textbook rentals. Comparable store sales increased 0.4%. College comparable store sales reflect 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.
BN.com sales increased 17% over the prior year, from $177 million to $206 million. Comparable sales increased 38%, on top of a 59% increase a year ago. This increase was driven by continued growth of digital content sales and purchases of award winning NOOK™ devices. BN.com comparable sales reflect the actual selling price for eBooks sold under the agency model rather than solely the commission received.
SECOND QUARTER EARNINGS
Earnings before interest, taxes, depreciation and amortization (EBITDA) grew 21% over the prior year, from $46 million to $56 million.
Retail EBITDA grew from $1.3 million to $21.0 million, benefiting from higher product margins this year. In addition, the prior year included $10 million of litigation and proxy contest costs. College EBITDA declined slightly from $95.3 million to $93.9 million. BN.com EBITDA losses increased from $50.2 million to $58.9 million, driven by planned product markdowns on the recently announced NOOK price adjustments, as well as higher advertising production costs.
Total company net loss was $6.6 million for the quarter, or $0.17 per share, as compared to a net loss of $12.6 million last year, or $0.22 per share. Included in the current quarter is a $0.06 loss per share related to the company’s preferred stock dividend, in accordance with ASC 260, Earnings per Share. The dividend is deducted from earnings available to common shareholders in the earnings per share calculation and does not impact the company’s results of operations.
BARNES & NOBLE LAUNCHES NOOK Tablet™
On November 7, 2011, Barnes & Noble launched NOOK Tablet, the company’s fastest and lightest tablet with the best in entertainment. msnbc.com cited the product as a “terrific tablet,” The Associated Press called it “really impressive” and Forrester Research Inc. called it a “wow product”. In the first few weeks of launch, NOOK Tablet has become the fastest selling NOOK product in the company’s history.
Concurrent with the launch of NOOK Tablet, the company also announced enhancements and new low prices for NOOK Color™ and NOOK Simple Touch™, retailing at $199 and $99, respectively.
The newly updated NOOK Simple Touch continues to earn high praise from leading tech review outlets. CNET, PCMag and Laptop Magazine rank it among their top-rated touch eReaders with all three naming it “Editor’s Choice” and this week, PC World rated NOOK Simple Touch the #1 eReader (11/29/11).
The consolidated NOOK business across all of the company’s segments, including sales of digital content, device hardware and related accessories, increased 85% in the second quarter to $220 million, on a comparable sales basis.
“The launch of NOOK Tablet, combined with the product enhancements to NOOK Color and $99 NOOK Simple Touch, represents the highest-quality portfolio of digital reading products on the market at incredible values,” said William Lynch, chief executive officer of Barnes & Noble, Inc. “We expect to sell millions of devices during our third quarter, adding to the millions of current NOOK customers. This growing base of customers buying digital content from Barnes & Noble will continue to position us as one of the fastest growing companies in this exploding digital content market, and we project this will generate significant returns on our investments for years to come.”
HOLIDAY RESULTS TO DATE
Over the three-day holiday weekend, comparable store sales increased 10.9% at Barnes & Noble stores, on top of 17% comparable store growth last year. “Based on early sales and traffic results in stores we are encouraged by our prospects for this upcoming holiday,” added William Lynch.
FULL YEAR GUIDANCE
The company expects full year EBITDA to be at the lower end of the previously issued range of $210 million to $250 million. Although the company has seen and continues to expect increases in retail earnings from plan, it plans to invest more heavily in customer acquisition activities to fuel NOOK digital growth. These investments primarily include promotional activity and advertising for NOOK products, as well as technology costs related to developing other opportunities.
CONFERENCE CALL
A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, December 1, 2011, and is accessible at www.barnesandnobleinc.com/webcasts.
Barnes & Noble, Inc. will report holiday sales on or about January 5, 2012.
ABOUT BARNES & NOBLE, INC.
Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller and a Fortune 500 company, operates 703 bookstores in 50 states. Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of Barnes & Noble, also operates 637 college bookstores serving over 4.6 million students and faculty members at colleges and universities across the United States. Barnes & Noble conducts its online business through BN.com (www.bn.com), one of the Web's largest e-commerce sites, which also features more than two million titles in its NOOK Bookstore™ (www.bn.com/ebooks). Through Barnes & Noble’s NOOK™ eReading product offering, customers can buy and read digital books and content on the widest range of platforms, including NOOK devices, partner company products, and the most popular mobile and computing devices using free NOOK software.
General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate website: www.barnesandnobleinc.com.
NOOK®, NOOK Tablet™, NOOK Simple Touch ™, NOOK 1st Edition™, NOOK 1st Edition Wi-Fi™, NOOK Color™, Reader’s Tablet™, PagePerfect™, Best-Text™, Fast Page™, NOOK Books™, NOOK Store™, NOOK Bookstore™, NOOK Newsstand™, NOOK Magazines™, VividView™, ArticleView™, NOOK Newspapers™, NOOK Comics™, NOOK Cloud™, NOOK Apps™, FREE NOOK Reading Apps™, PubIt!™, NOOK Discover™, NOOK Kids™, Read and Play™, Read to Me™, Read and Record™, NOOK Digital Shop™, Read In Store™, More In Store™, NOOK Friends™, LendMe®, NOOK Library™, NOOK Boutiques™, The Barnes & Noble Promise™, NOOK Books en español™, NOOK Study™, Free Friday™, Lifetime Library™ and Read What You Love. Anywhere You Like™ are trademarks of Barnes & Noble, Inc. Other trademarks referenced in this release are the property of their respective owners.
Follow Barnes & Noble on Twitter (www.bn.com/twitter), Facebook (http://www.facebook.com/barnesandnoble) and YouTube (http://www.youtube.com/user/bnstudio).
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," "will" and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.
Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble's products, low growth or declining sales and net income due to various factors, risk that international expansion will not be successfully achieved or may be achieved later than expected, possible disruptions in Barnes & Noble's computer systems, telephone systems or supply chain, possible risks associated with data privacy, information security and intellectual property, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, the risk that the expected sales lift from Borders’ store closures is not achieved in whole or part, the risk that digital sales growth is less than expectations and the risk that it does not exceed the rate of investment spend, higher-than-anticipated store closing or relocation costs, higher interest rates, the performance of Barnes & Noble's online, digital and other initiatives, the performance and successful integration of acquired businesses, the success of Barnes & Noble's strategic investments, unanticipated increases in merchandise, component or occupancy costs, unanticipated adverse litigation results or effects, product and component shortages, and other factors which may be outside of Barnes & Noble's control, including those factors discussed in detail in Item 1A, "Risk Factors," in Barnes & Noble's Annual Report on Form 10-K and Form 10-K/A, and in Barnes & Noble's other filings made hereafter from time to time with the SEC.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this communication.
| BARNES & NOBLE, INC. AND SUBSIDIARIES | ||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| 13 weeks ended | 13 weeks ended | 26 weeks ended | 26 weeks ended | |||||||||||||||||
| October 29, 2011 | October 30, 2010 | October 29, 2011 | October 30, 2010 | |||||||||||||||||
| Sales | $ | 1,891,961 | 1,904,146 | $ | 3,310,365 |
|
3,299,989 | |||||||||||||
| Cost of sales and occupancy | 1,420,297 | 1,454,026 | 2,451,143 | 2,498,169 | ||||||||||||||||
| Gross profit | 471,664 | 450,120 | 859,222 | 801,820 | ||||||||||||||||
| Selling and administrative expenses | 415,632 | 403,822 | 826,750 | 786,231 | ||||||||||||||||
| Depreciation and amortization | 57,755 | 56,777 | 113,427 | 113,681 | ||||||||||||||||
| Operating loss | (1,723 | ) | (10,479 | ) | (80,955 | ) | (98,092 | ) | ||||||||||||
| Interest expense, net | 8,460 | 12,791 | 17,901 | 26,053 | ||||||||||||||||
| Loss before taxes | (10,183 | ) | (23,270 | ) | (98,856 | ) | (124,145 | ) | ||||||||||||
| Income taxes | (3,620 | ) | (10,690 | ) | (35,687 | ) | (49,023 | ) | ||||||||||||
| Net loss | (6,563 | ) | (12,580 | ) | (63,169 | ) | (75,122 | ) | ||||||||||||
| Net loss attributable to noncontrolling interests | - | 12 | - | 37 | ||||||||||||||||
| Net loss attributable to Barnes & Noble, Inc. | $ | (6,563 | ) | (12,568 | ) | $ | (63,169 | ) |
|
(75,085 | ) | |||||||||
| Basic loss per common share: | ||||||||||||||||||||
| Loss attributable to Barnes & Noble, Inc. available | $ | (0.17 | ) | (0.22 | ) | $ | (1.16 | ) |
|
(1.34 | ) | |||||||||
| for common shareholders | ||||||||||||||||||||
| Diluted loss per common share: | ||||||||||||||||||||
| Loss attributable to Barnes & Noble, Inc. available | $ | (0.17 | ) | (0.22 | ) | $ | (1.16 | ) |
|
(1.34 | ) | |||||||||
| for common shareholders | ||||||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||
| Basic | 57,261 | 56,708 | 57,207 | 56,239 | ||||||||||||||||
| Diluted | 57,261 | 56,708 | 57,207 | 56,239 | ||||||||||||||||
| Dividends declared per common share | $ | - | 0.25 | $ | - |
|
0.50 | |||||||||||||
| Percentage of sales: | ||||||||||||||||||||
| Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| Cost of sales and occupancy | 75.1 | % | 76.4 | % | 74.0 | % | 75.7 | % | ||||||||||||
| Gross profit | 24.9 | % | 23.6 | % | 26.0 | % | 24.3 | % | ||||||||||||
| Selling and administrative expenses | 22.0 | % | 21.2 | % | 25.0 | % | 23.8 | % | ||||||||||||
| Depreciation and amortization | 3.1 | % | 3.0 | % | 3.4 | % | 3.4 | % | ||||||||||||
| Operating loss | -0.1 | % | -0.6 | % | -2.4 | % | -3.0 | % | ||||||||||||
| Interest expense, net | 0.4 | % | 0.7 | % | 0.5 | % | 0.8 | % | ||||||||||||
| Loss before taxes | -0.5 | % | -1.2 | % | -3.0 | % | -3.8 | % | ||||||||||||
| Income taxes | -0.2 | % | -0.6 | % | -1.1 | % | -1.5 | % | ||||||||||||
| Net loss | -0.3 | % | -0.7 | % | -1.9 | % | -2.3 | % | ||||||||||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| (In thousands) | |||||||||||
| October 29, 2011 | October 30, 2010 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 23,633 |
|
30,163 | |||||||
| Receivables, net | 240,600 | 185,253 | |||||||||
| Merchandise inventories | 1,836,740 | 1,761,118 | |||||||||
| Prepaid expenses and other current assets | 180,352 | 126,326 | |||||||||
| Total current assets | 2,281,325 | 2,102,860 | |||||||||
| Property and equipment: | |||||||||||
| Land and land improvements | 8,617 | 8,617 | |||||||||
| Buildings and leasehold improvements | 1,220,869 | 1,210,233 | |||||||||
| Fixtures and equipment | 1,725,135 | 1,638,652 | |||||||||
| 2,954,621 | 2,857,502 | ||||||||||
| Less accumulated depreciation and amortization | 2,280,551 | 2,101,057 | |||||||||
| Net property and equipment | 674,070 | 756,445 | |||||||||
| Goodwill | 521,899 | 526,327 | |||||||||
| Intangible assets, net | 574,964 | 573,789 | |||||||||
| Other noncurrent assets | 55,794 | 59,845 | |||||||||
| Total assets | $ | 4,108,052 |
|
4,019,266 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,461,981 |
|
1,318,744 | |||||||
| Accrued liabilities | 724,136 | 608,301 | |||||||||
| Short-term note payable | - | 100,000 | |||||||||
| Total current liabilities | 2,186,117 | 2,027,045 | |||||||||
| Long-term debt | 274,900 | 376,900 | |||||||||
| Long-term deferred taxes | 275,868 | 310,712 | |||||||||
| Other long-term liabilities | 418,923 | 481,426 | |||||||||
| Redeemable Preferred Shares; $.001 par value; 5,000 | 191,681 | - | |||||||||
| shares authorized; 204 and zero shares issued, respectively | |||||||||||
| Shareholders' equity: | |||||||||||
| Common stock; $.001 par value; 300,000 shares | |||||||||||
| authorized; 90,856 and 90,231 shares issued, respectively | 91 | 90 | |||||||||
| Additional paid-in capital | 1,331,983 | 1,313,678 | |||||||||
| Accumulated other comprehensive loss | (11,630 | ) | (13,212 | ) | |||||||
| Retained earnings | 495,830 | 576,277 | |||||||||
| Treasury stock, at cost, 33,527 and 33,360 shares, respectively | (1,055,711 | ) | (1,053,650 | ) | |||||||
| Total shareholders' equity | 760,563 | 823,183 | |||||||||
| Commitments and contingencies | - | - | |||||||||
| Total liabilities and shareholders' equity | $ | 4,108,052 |
|
4,019,266 | |||||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
| Segment Information | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||
| 13 weeks ended | 13 weeks ended | 26 weeks ended | 26 weeks ended | |||||||||||||||||||
| October 29, 2011 | October 30, 2010 | October 29, 2011 | October 30, 2010 | |||||||||||||||||||
| Sales | ||||||||||||||||||||||
| Barnes & Noble Retail | $ | 917,576 |
|
930,793 | $ | 1,918,141 |
|
1,957,062 | ||||||||||||||
| Barnes & Noble College | 768,463 | 796,650 | 988,254 | 1,021,512 | ||||||||||||||||||
| Barnes & Noble.com | 205,922 | 176,703 | 403,970 | 321,415 | ||||||||||||||||||
| Total | $ | 1,891,961 | 1,904,146 | $ | 3,310,365 | 3,299,989 | ||||||||||||||||
| Gross Profit | ||||||||||||||||||||||
| Barnes & Noble Retail | $ | 273,069 |
|
269,714 | $ | 567,935 |
|
565,385 | ||||||||||||||
| Barnes & Noble College | 167,588 | 169,150 | 218,744 | 219,847 | ||||||||||||||||||
| Barnes & Noble.com | 31,007 | 11,256 | 72,543 | 16,588 | ||||||||||||||||||
| Total | $ | 471,664 | 450,120 | $ | 859,222 | 801,820 | ||||||||||||||||
| Selling and Administrative Expenses | ||||||||||||||||||||||
| Barnes & Noble Retail | $ | 252,052 |
|
268,449 | $ | 501,400 |
|
538,599 | ||||||||||||||
| Barnes & Noble College | 73,684 | 73,869 | 135,642 | 134,099 | ||||||||||||||||||
| Barnes & Noble.com | 89,896 | 61,504 | 189,708 | 113,533 | ||||||||||||||||||
| Total | $ | 415,632 | 403,822 | $ | 826,750 | 786,231 | ||||||||||||||||
| EBITDA | ||||||||||||||||||||||
| Barnes & Noble Retail | $ | 21,017 |
|
1,265 | $ | 66,535 |
|
26,786 | ||||||||||||||
| Barnes & Noble College | 93,904 | 95,281 | 83,102 | 85,748 | ||||||||||||||||||
| Barnes & Noble.com | (58,889 | ) | (50,248 | ) | (117,165 | ) | (96,945 | ) | ||||||||||||||
| Total | $ | 56,032 | 46,298 | $ | 32,472 | 15,589 | ||||||||||||||||
| Net Income (Loss) | ||||||||||||||||||||||
| EBITDA | $ | 56,032 | 46,298 | $ | 32,472 | 15,589 | ||||||||||||||||
| Depreciation and Amortization | (57,755 | ) | (56,777 | ) | (113,427 | ) | (113,681 | ) | ||||||||||||||
| Interest Expense, net | (8,460 | ) | (12,791 | ) | (17,901 | ) | (26,053 | ) | ||||||||||||||
| Income Taxes | 3,620 | 10,690 | 35,687 | 49,023 | ||||||||||||||||||
| Total | $ | (6,563 | ) | (12,580 | ) | $ | (63,169 | ) | (75,122 | ) | ||||||||||||
| Percentage of sales: | ||||||||||||||||||||||
| Gross Margin | ||||||||||||||||||||||
| Barnes & Noble Retail | 29.8 | % | 29.0 | % | 29.6 | % | 28.9 | % | ||||||||||||||
| Barnes & Noble College | 21.8 | % | 21.2 | % | 22.1 | % | 21.5 | % | ||||||||||||||
| Barnes & Noble.com | 15.1 | % | 6.4 | % | 18.0 | % | 5.2 | % | ||||||||||||||
| Total | 24.9 | % | 23.6 | % | 26.0 | % | 24.3 | % | ||||||||||||||
| Selling and Administrative Expenses | ||||||||||||||||||||||
| Barnes & Noble Retail | 27.5 | % | 28.8 | % | 26.1 | % | 27.5 | % | ||||||||||||||
| Barnes & Noble College | 9.6 | % | 9.3 | % | 13.7 | % | 13.1 | % | ||||||||||||||
| Barnes & Noble.com | 43.7 | % | 34.8 | % | 47.0 | % | 35.3 | % | ||||||||||||||
| Total | 22.0 | % | 21.2 | % | 25.0 | % | 23.8 | % | ||||||||||||||