Barnes & Noble on Thursday reported its results for the second fiscal quarter of 2012, in which it revealed its Nook business has seen stellar growth over the last year. The company said that its Nook business, which includes sales of tablets, eReaders and eBooks, pulled in $220 million in the second quarter, up 85% from the same quarter last year. Barnes & Noble did not reveal how many Nook devices it sold during the quarter but said that it expects to sell “millions of devices” during the third fiscal quarter. B&N.com sales increased 17% year-over-year from $177 million to $206 million, but Barnes & Noble’s overall sales fell 0.6% from $190 billion in the second quarter last year to $189 billion this past quarter. Retail sales also dropped 1% from $931 million to $918 million. Barnes & Noble’s full press release follows after the break.
Barnes & Noble Reports Fiscal 2012 Second Quarter Financial Results
EBITDA Increases 21% over the Prior Year
Comparable Store Sales Increase 10.9% over the Three Day Holiday Weekend
NOOK Tablet™ Becomes Fastest Selling NOOK™ Product
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 http://www.barnesandnobleinc.com/webcasts.
Barnes & Noble, Inc. will report holiday sales on or about January 5, 2012.
