NEW YORK--(BUSINESS WIRE)--Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for its fiscal 2012 first quarter ended July 30, 2011.
FIRST QUARTER RESULTS
Total sales for the first quarter were $1.4 billion, a 2% increase compared to the prior year. Sales through BN.com increased 37% as compared to the prior year to $198 million, with comparable sales increasing 65%. This increase was driven by strong demand for the NOOK product line, including the continued success of the Award Winning NOOK Color, the mid-quarter launch of the NOOK Simple Touch Reader and a quadrupling of digital content sales over last year’s first quarter.
Barnes & Noble store sales decreased 3% to $1 billion, with comparable store sales decreasing 1.6% for the quarter. While traditional physical book sales declined during the quarter, the stores posted large increases in sales of the NOOK product line and Toys & Games. In a non-back-to-school period, Barnes & Noble College Bookstore (“College”) sales declined 2% to $220 million, with comparable store sales decreasing 1.8%.
The consolidated NOOK business across all of the company’s segments, including sales of digital content, device hardware and related accessories, increased 140% in the first quarter to $277 million, on a comparable sales basis.
EARNINGS
The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) improved 23% this quarter from a loss of $30.7 million to $23.6 million. For the first quarter, the company reported a consolidated net loss of $57 million, or $0.99 per share. The company’s effective tax rate is 36.2%, lower than its previous rate of 39.7%. The change in the effective tax rate had a $0.05 per share impact on the quarter. Excluding the impact of the tax rate change, the company’s net loss per share was $0.94.
“Our strategy of growing market share in the exploding digital content business while maximizing cash flow and EBITDA from our retail operations is paying off,” said William Lynch, chief executive officer. “We plan to continue investing in the significant growth areas of our business, and in fiscal 2012, we expect to see leverage as our digital sales growth is projected to exceed the growth of investment spend. Additionally, the return on investment is expected to increase in future years, as readers purchase increasing amounts of digital content on the platform we have built.”
“Our NOOK eReaders and applications continue to be cited as the finest digital reading products on the market, with the new NOOK Simple Touch Reader recently rated as the best eReader,” Mr. Lynch added. “The company is encouraged by the progress achieved against our strategy and believes in our plan to continue to appropriately invest in the massive digital opportunity, while delivering strong EBITDA growth this year.”
GUIDANCE
For the full fiscal year 2012 consolidated sales are forecasted to be $7.4 billion. Comparable sales at BN.com are expected to increase 60% to 70%. Barnes & Noble comparable store sales are expected to increase 2% to 3% and College’s comparable store sales are expected to be flat. The company expects a $150 million to $200 million sales lift in this fiscal year following the complete liquidation of Borders stores. The consolidated NOOK business across all of the company’s segments, including sales of digital content, device hardware and related accessories, is expected to double this year to $1.8 billion from $880 million last year and $123 million in fiscal 2010, on a comparable sales basis.
The company expects full year earnings before interest, taxes, depreciation and amortization (EBITDA) to be in a range of $210 million to $250 million, representing a 30% to 50% increase as compared to the prior year. This year’s EBITDA forecast includes transaction, advisory and legal costs of approximately $15 million related to the strategic alternatives process and the recently completed $204 million investment made by Liberty Media in the company. The company expects full year losses per share to be in a range of $0.10 to $0.50.
CONFERENCE CALL
A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Tuesday, August 30, 2011, and is accessible at www.barnesandnobleinc.com/webcasts.
Barnes & Noble, Inc. will report fiscal 2012 second quarter earnings results on or about November 22, 2011.
ABOUT BARNES & NOBLE, INC.
Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller and a Fortune 500 company, operates 704 bookstores in 50 states. Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of Barnes & Noble, also operates 635 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(TM) (www.bn.com/ebooks). Through Barnes & Noble’s NOOK(TM) eReading product offering, customers can buy and read eBooks on the widest range of platforms, including NOOK eBook Readers, devices from partner companies, and hundreds of 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.
The All-New NOOK(TM), The Simple Touch Reader(TM), NOOK(TM), NOOK 1st Edition(TM), NOOK Wi-Fi 1st Edition(TM), NOOK Color(TM), Reader’s Tablet(TM), Fast Page(TM), NOOK Books(TM), NOOK Bookstore(TM), NOOK Newsstand(TM), PubIt!(TM), NOOK Kids(TM), Read In Store(TM), More In Store(TM), NOOK Friends(TM), LendMe(R), NOOK Library(TM), NOOK Boutiques(TM), The Barnes & Noble Promise(TM), NOOK Books en español(TM), NOOK Study(TM), Free Friday(TM), Lifetime Library(TM) and Read What You Love. Anywhere You Like(TM) 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 (www.facebook.com/barnesandnoble) and YouTube (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, 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, potential effects of a bankruptcy filing by one of Barnes & Noble's largest competitors and actions taken by that competitor during bankruptcy, including store closures, sales of inventory at discounted prices and elimination of liabilities, the risk that the expected $200 million 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, the risk that clearance under the Hart-Scott-Rodino Act with respect to Liberty GIC, Inc.’s (Liberty), a subsidiary of Liberty Media Corporation, investment in the Company may not be received and the effects of the failure to receive such clearance, 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 | ||||||
| July 30, 2011 | July 31, 2010 | ||||||
| Sales | $ | 1,418,404 | 1,395,842 | ||||
| Cost of sales and occupancy | 1,030,846 | 1,044,142 | |||||
| Gross profit | 387,558 | 351,700 | |||||
| Selling and administrative expenses | 411,118 | 382,408 | |||||
| Depreciation and amortization | 55,671 | 56,905 | |||||
| Operating loss | (79,231 | ) | (87,613 | ) | |||
| Interest expense, net | 9,442 | 13,263 | |||||
| Loss before taxes | (88,673 | ) | (100,876 | ) | |||
| Income taxes | (32,067 | ) | (38,333 | ) | |||
| Net loss | (56,606 | ) | (62,543 | ) | |||
| Net loss attributable to noncontrolling interests | - | 25 | |||||
| Net loss attributable to Barnes & Noble, Inc. | $ | (56,606 | ) | (62,518 | ) | ||
| Basic loss per common share: | |||||||
| Loss attributable to Barnes & Noble, Inc. | $ | (0.99 | ) | (1.12 | ) | ||
| Diluted loss per common share: | |||||||
| Loss attributable to Barnes & Noble, Inc. | $ | (0.99 | ) | (1.12 | ) | ||
| Weighted average common shares outstanding | |||||||
| Basic | 57,153 | 55,770 | |||||
| Diluted | 57,153 | 55,770 | |||||
| Dividends declared per common share | $ | - | 0.25 | ||||
| Percentage of sales: | |||||||
| Sales | 100.0 | % | 100.0 | % | |||
| Cost of sales and occupancy | 72.7 | % | 74.8 | % | |||
| Gross profit | 27.3 | % | 25.2 | % | |||
| Selling and administrative expenses | 29.0 | % | 27.4 | % | |||
| Depreciation and amortization | 3.9 | % | 4.1 | % | |||
| Operating loss | -5.6 | % | -6.3 | % | |||
| Interest expense, net | 0.7 | % | 1.0 | % | |||
| Loss before taxes | -6.3 | % | -7.2 | % | |||
| Income taxes | -2.3 | % | -2.7 | % | |||
| Net loss | -4.0 | % | -4.5 | % | |||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | |||||||
| Consolidated Balance Sheets | |||||||
| (In thousands) | |||||||
|
|
|||||||
| July 30, 2011 | July 31, 2010 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 22,353 | 27,019 | ||||
| Receivables, net | 156,543 | 111,087 | |||||
| Merchandise inventories | 1,814,436 | 1,787,683 | |||||
| Prepaid expenses and other current assets | 156,632 | 187,362 | |||||
| Total current assets | 2,149,964 | 2,113,151 | |||||
| Property and equipment: | |||||||
| Land and land improvements | 8,617 | 8,617 | |||||
| Buildings and leasehold improvements | 1,208,454 | 1,206,255 | |||||
| Fixtures and equipment | 1,690,529 | 1,613,754 | |||||
| 2,907,600 | 2,828,626 | ||||||
| Less accumulated depreciation and amortization | 2,228,562 | 2,048,760 | |||||
| Net property and equipment | 679,038 | 779,866 | |||||
| Goodwill | 523,006 | 527,434 | |||||
| Intangible assets, net | 563,034 | 577,300 | |||||
| Other noncurrent assets | 56,615 | 62,103 | |||||
| Total assets | $ | 3,971,657 | 4,059,854 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 1,275,708 | 1,267,786 | ||||
| Accrued liabilities | 704,916 | 674,460 | |||||
| Short-term note payable | - | 100,000 | |||||
| Total current liabilities | 1,980,624 | 2,042,246 | |||||
| Long-term debt | 509,600 | 380,000 | |||||
| Deferred taxes | 279,716 | 311,158 | |||||
| Other long-term liabilities | 434,334 | 496,329 | |||||
| Shareholders' equity: | |||||||
| Common stock; $.001 par value; 300,000 shares | |||||||
| authorized; 90,641 and 89,102 | |||||||
| shares issued, respectively | 91 | 89 | |||||
| Additional paid-in capital | 1,327,948 | 1,290,803 | |||||
| Accumulated other comprehensive loss | (11,630 | ) | (13,212 | ) | |||
| Retained earnings | 505,773 | 603,850 | |||||
| Treasury stock, at cost, 33,453 and 33,314 shares, respectively | (1,054,799 | ) | (1,052,935 | ) | |||
| Total Barnes & Noble, Inc. shareholders' equity | 767,383 | 828,595 | |||||
| Noncontrolling interest | - | 1,526 | |||||
| Total shareholders' equity | 767,383 | 830,121 | |||||
| Commitments and contingencies | - | - | |||||
| Total liabilities and shareholders' equity | $ | 3,971,657 | 4,059,854 | ||||
| BARNES & NOBLE, INC. AND SUBSIDIARIES | ||||||||
| Segment Information | ||||||||
| (In thousands) | ||||||||
| 13 weeks ended | 13 weeks ended | |||||||
| July 30, 2011 | July 31, 2010 | |||||||
| Sales | ||||||||
| Barnes & Noble Retail | $ | 1,000,565 | 1,026,269 | |||||
| Barnes & Noble College | 219,791 | 224,861 | ||||||
| Barnes & Noble.com | 198,048 | 144,712 | ||||||
| Total | $ | 1,418,404 | 1,395,842 | |||||
| Gross Profit | ||||||||
| Barnes & Noble Retail | $ | 294,866 | 295,671 | |||||
| Barnes & Noble College | 51,156 | 50,697 | ||||||
| Barnes & Noble.com | 41,536 | 5,332 | ||||||
| Total | $ | 387,558 | 351,700 | |||||
| Selling and Administrative Expenses | ||||||||
| Barnes & Noble Retail | $ | 249,347 | 270,147 | |||||
| Barnes & Noble College | 61,959 | 60,231 | ||||||
| Barnes & Noble.com | 99,812 | 52,030 | ||||||
| Total | $ | 411,118 | 382,408 | |||||
| EBITDA | ||||||||
| Barnes & Noble Retail | $ | 45,518 | 25,523 | |||||
| Barnes & Noble College | (10,803 | ) | (9,534 | ) | ||||
| Barnes & Noble.com | (58,275 | ) | (46,697 | ) | ||||
| Total | $ | (23,560 | ) | (30,708 | ) | |||
| Net Income (Loss) | ||||||||
| EBITDA | $ | (23,560 | ) | (30,708 | ) | |||
| Depreciation and Amortization | (55,671 | ) | (56,905 | ) | ||||
| Interest Expense, net | (9,442 | ) | (13,263 | ) | ||||
| Income Taxes | 32,067 | 38,333 | ||||||
| Total | $ | (56,606 | ) | (62,543 | ) | |||
| Percentage of sales: | ||||||||
| Gross Margin | ||||||||
| Barnes & Noble Retail | 29.5 | % | 28.8 | % | ||||
| Barnes & Noble College | 23.3 | % | 22.5 | % | ||||
| Barnes & Noble.com | 21.0 | % | 3.7 | % | ||||
| Total | 27.3 | % | 25.2 | % | ||||
| Selling and Administrative Expenses | ||||||||
| Barnes & Noble Retail | 24.9 | % | 26.3 | % | ||||
| Barnes & Noble College | 28.2 | % | 26.8 | % | ||||
| Barnes & Noble.com | 50.4 | % | 36.0 | % | ||||
| Total | 29.0 | % | 27.4 | % | ||||