Barnes & Noble Q1 Loss Narrows Despite Lower Sales

(RTTNews) - Bookstore chain Barnes & Noble, Inc. (BKS) on Tuesday reported a loss for the first quarter that narrowed from last year, reflecting lower expenses as well as improved margins that helped offset a decline in sales.

Loss per share for the quarter was narrower than analysts' expectations, while quarterly revenues missed their estimates. Looking ahead, the company affirmed its segment sales guidance for fiscal 2015.

Michael Huseby, chief executive officer of Barnes & Noble, said, "We continued to improve our financial performance, while further executing on our strategic initiatives, including work on the proposed separation of the Barnes & Noble Retail and NOOK Media businesses."

In June 2014, Barnes & Noble said its board of directors has authorized to separate the Barnes & Noble Retail and Nook Media businesses into two separate public companies in order to optimize shareholder value. The board expects to complete the separation by the end of the first calender quarter of 2015.

The New York-based company's net loss for the first quarter narrowed to $28.45 million or $0.56 per share from $87.02 million or $1.56 per share in the year-ago quarter.

The prior-year quarter's results included a valuation allowance against certain deferred tax assets of $41 million, or $0.70 per share.

On average, four analysts polled by Thomson Reuters expected the company to report loss of $0.63 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter declined 7 percent to $1.24 billion from $1.33 billion in the same quarter last year and missed analysts' consensus revenue estimate of $1.26 billion.

Cost of sales and occupancy declined 11 percent from last year to $853.76 million. Selling and administrative expenses decreased 6 percent to $353.14 million and depreciation and amortization expenses declined 9 percent to $50.27 million.

Barnes & Noble retail store sales, which consists of the Barnes & Noble bookstores and BN.com businesses, declined 5 percent for the quarter from last year to $954.81 million.

The sales decrease was attributable to a comparable store sales decline of 5.1 percent for the quarter, store closures and lower online sales. This was partially offset by a $7 million recognized contingent profit with a warranty service provider.

The decline in comparable store sales was primarily due to lower sales of Nook products. Core comparable bookstore sales, which exclude sales of Nook products, decreased 0.4 percent for the quarter.

Barnes & Noble College sales for the quarter were flat with last year at $226.09 million, while comparable store sales declined 2.0 percent. Comparable store sales were impacted by the timing of the start of the back-to-school rush season as compared to last year.

The company's Nook segment, which includes devices, digital content and accessories, reported a 54 percent decline in revenue from last year to $70.03 million.

Device and accessories sales decreased 79 percent to $18 million, due to lower unit selling volume. Digital content sales declined 24 percent to $52 million, due primarily to lower device unit sales.

During the quarter, Nook launched its first co-branded tablet in partnership with Samsung Electronics Co. Ltd. (SSNLF, SSNNF), its first new tablet in almost two years.

However, the company's gross profit margin for the quarter expanded to 31 percent from last year's 27.7 percent.

Looking ahead to fiscal 2015, Barnes & Noble affirmed its outlook for both retail comparable bookstore sales and retail core comparable bookstore sales to decline in the low-single digits.

The company continues to expect college comparable store sales to decline in the low-single digits. The company also expects full-year EBITDA losses in the Nook segment to decline versus the prior year.

BKS closed Monday's trading at $23.40. In Tuesday's pre-market trades, the stock is up $1.10 or 4.70 percent to $24.50.