By Jeffrey A. Trachtenberg
Improved results from Barnes & Noble Inc.'s (BKS) consumer
stores group, ignited by the racy, hugely popular "Fifty Shades of
Grey" erotic trilogy, enabled the bookseller to narrow its losses
for the first fiscal quarter.
The nation's largest bookstore chain, continuing to benefit from
the closing last year of Borders Group Inc., reported total revenue
of $1.45 billion, up 2.5%. The company posted a quarterly loss of
$41 million, or 78 cents per share, compared with a loss of $56.6
million, or 99 cents per share, in the year-earlier quarter.
The result for the quarter, which ended July 28, was
significantly better than the loss of 96 cents per share expected
by analysts, according to Thomson Reuters.
The company's 689 consumer bookstores stood out as their revenue
grew 2% to $1.1 billion. Same-store sales--a measure of stores open
at least a year--increased 4.6%. The unit's earnings before
interest, taxes, depreciation and amortization jumped 88% to $75
million compared with $40 million in the year-earlier quarter.
"Traffic was up in our stores for the first time in many years,"
said Mitchell Klipper, chief executive of the retail group, during
an analyst call Tuesday morning. Mr. Klipper added that he expects
the "halo effect" of the Borders liquidation to slow for the
remainder of the fiscal year and beyond.
Revenue at the Nook digital business was virtually flat,
although Barnes & Noble said digital content sales rose 46%,
suggesting that people who had bought Nook devices in earlier
periods were now buying more e-books and digital magazines. The
company has estimated that it controls about 27% of the
digital-books market in the U.S., second only to Amazon.com Inc.
(AMZN).
The retailer said revenue from devices fell due to "lower
average selling prices" as well as "production scaling issues
surrounding the popular newly launched Glowlight product resulting
in unmet demand."
The retailer, which recently slashed its tablet prices, has had
a difficult time keeping the popular Nook Glowlight e-reader in
stock. During the conference call, Barnes & Noble Chief
Executive William Lynch expressed frustration over lost potential
sales but said the manufacturing issues have been resolved and Nook
Glowlight products are now in stock in all locations.
Barnes & Noble is expected to soon unveil a new Nook Tablet
for the holiday season.
The digital business loss, before interest, taxes, depreciation
and amortization widened 11% to $57 million for the quarter from
$51 million in the year-earlier quarter.
The widening Nook digital losses come at a time when Barnes
& Noble is in a furious device battle in the U.S. with
Amazon.com Inc.'s Kindle Fire tablet, Apple Inc.'s (AAPL) iPad and
Google Inc.'s (GOOG) Nexus 7 tablet, among others. The landscape
may soon grow even more crowded.
Microsoft Corp. (MSFT) in late April agreed to invest $605
million in exchange for a minority stake in the Nook business and
Barnes & Noble's college bookstore group. The Microsoft
investment is expected to close this fall. Barnes & Noble is
creating a Nook app for Windows 8, which will enable Microsoft
customers to access the retailer's e-books and other digital
offerings.
Barnes & Noble's college store division reported slightly
greater losses before interest, taxes, depreciation and
amortization, on flat sales. Comparable college store sales fell
2%.
Write to Jeffrey A. Trachtenberg at
Jeffrey.Trachtenberg@wsj.com
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