Barnes & Noble reports surprise profit on lower than expected revenue; reaffirms guidance
Reports Q2 (Oct) earnings of $0.15 per share, $0.26 better than the Capital IQ Consensus Estimate of ($0.11); revenues fell 8.0% year/year to $1.73 bln vs the $1.76 bln consensus.
Guidance
The co reaffirms its previously issued full-year guidance, in which it expects Retail comparable store sales to decline in the high single digits, Core Retail comparable bookstore sales to decline in the low- to mid-single digits and College comparable store sales to decline in the low single digits.
By Segment
Retail The Retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, had revenues of $921 million for the quarter, a decrease of 7.5% from the prior year. The sales decrease, which was in-line with company expectations, was attributable to a comparable store sales decrease of 4.9% for the quarter, store closures and lower online sales. "Core" comparable bookstore sales, which exclude sales of NOOK products, decreased 3.7% for the quarter on lower store traffic and comparisons to the Fifty Shades of Grey trilogy a year ago. Retail generated EBITDA of $37 million in the quarter, increasing 21.2% as compared to a year ago as the sales decline was offset by strong expense management, including higher store productivity.
College The College segment had revenues of $738 million, decreasing 4.6% compared to a year ago. Comparable College sales decreased 3.6% for the quarter, impacted by a higher mix of lower priced used textbook rentals and lower textbook sales, partially offset by higher general merchandise sales. The second quarter includes the fall back to school rush season. Comparable College store sales reflect the retail selling price of new or used textbooks when rented. College EBITDA declined $3 million as compared to a year ago to $84 million. The decline is primarily attributable to higher textbook rental volume, where revenues received are deferred and amortized over the rental period, which generally spans the term of the semester. The co also continued to invest in digital product development. These factors were partially mitigated by increased store count, as well as higher margins associated with textbook rentals and a greater sales mix of general merchandise.
NOOK The NOOK segment, which consists of the co's digital business (including digital content, devices and accessories), reported revenues of $109 million for the quarter, decreasing 32.2% from a year ago. Digital content sales were $57 million for the quarter, a decline of 21.2% compared to a year ago, due to lower average selling prices and lower device unit sales. Device and accessories sales were $51 million for the quarter, a decrease of 41.3% from a year ago, due to lower unit selling volume and lower average selling prices. Despite the sales decline, NOOK EBITDA losses decreased $6 million as compared to a year ago to $45 million on lower device markdowns and reduced expenses.