Barnes & Noble Turns To Profit In Q2; Backs Full-year Outlook

(RTTNews) - Bookstore chain Barnes & Noble Inc. (BKS) on Tuesday reported a turnaround to profit in the second quarter as lower sales were more than offset by a decline in expenses and improved margins. However, sales for the quarter missed analysts' expectations. Looking ahead, Barnes & Noble reiterated its fiscal 2014 guidance.

Separately, Barnes & Noble said it has partnered with South Korean conglomerate Samsung Electronics Co. Ltd. (SSNLF.PK) to make Nook the only reading app on the new Samsung Galaxy Tab 3 Kids.

Michael Huseby, president of Barnes & Noble, Inc. and chief executive officer of Nook Media said, "During the second quarter, Barnes & Noble grew earnings through improved margins and reduced expenses, while also completing another successful College rush season."

The New York-based company's net income available to common shareholders for the second quarter was $8.61 million or $0.15 per share, compared to net loss of $3.89 million or $0.07 per share in the year-ago period. On average, analysts polled by Thomson Reuters expected the company to report loss of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated sales for the quarter declined 8 percent to $1.73 billion from $1.88 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $1.77 billion.

Barnes & Noble retail store sales, which consists of the Barnes & Noble bookstores and BN.com businesses, decreased 8 percent to $921 million. This reflects a comparable store sales decline of 4.9 percent, store closures and lower online sales. Exclude sales of Nook products, core comparable bookstore sales decreased 3.7 percent for the quarter on lower store traffic and comparisons to the Fifty Shades of Grey trilogy a year ago.

Meanwhile, Barnes & Noble College sales declined 5 percent to $737.5 million, and comparable store sales declined 3.6 percent.

The results were impacted by a higher mix of lower priced used-textbook rentals and lower textbook sales, partly offset by higher general merchandise sales. The latest quarter includes the fall back to school rush season.

The company's Nook segment that include devices, digital content and accessories reported a 32 percent decline in revenues from last year to $108.7 million.

Of this, device and accessories sales decreased 41 percent on lower unit selling volume as well as lower average selling prices. Digital content sales were down 21 percent from last year on lower average selling prices as well as lower device unit sales.

The company's gross margin for the quarter rose 100 basis points to 26.6 percent from last year's 25.6 percent.

Selling and administrative expenses for the quarter declined 7 percent from the year-ago period to $386.27 million, while depreciation and amortization expenses also decreased 7 percent to $53.68 million.

Looking ahead to fiscal 2014, Barnes & Noble reaffirmed its 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.

Huseby said, "We have a terrific book title line-up this holiday season, a leading assortment of educational Toys & Games and a full selection of NOOK devices, including our recently released new NOOK GlowLight."

Separately, Barnes & Noble said it has partnered with Samsung Electronics to make Nook the only reading app on the new Samsung Galaxy Tab 3 Kids. The company said its Nook reading app is compliant with the U.S. Children's Online Privacy Protection Act or COPPA.

In Tuesday's regular trading session, BKS is trading at $16.39, down $0.04 or 0.24 percent on a volume of 5,300 shares.