Barnes & Noble has released its latest earnings report for the 2014 first quarter. As expected, the company saw a drop in revenues for a total of 8.5 percent.
B&N’s retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, saw a decrease of 9.9 percent to $1 billion in revenues for the quarter.
However, the Nook division took a large loss, a drop of 20.2 percent from $192 million to $153 million compared to this time last year. B&N attributes that loss to lower sales on Nook devices than anticipated.
After the last quarter, many reports focused on what seemed like an upcoming split between the retail division and the Nook business. However, that won’t be happening now at B&N. The company announced that Chairman Leonard Riggio has decided to not pursue an offer for the retail side of the business.
In addition, CEO Michael Huseby was adamant that B&N still plans to focus on the Nook division.
“Many people interpreted these comments incorrectly and determined that we were getting out of the device business,” Huseby said in a conference call with investors. “I would like to be clear, we want our consumers to know we will continue to design innovative black and white, and color devices.”
B&N broke down the Nook numbers even further.
Device and accessories sales decreased 23.1 percent to $84 million from a year ago due to lower unit selling volume. In addition, digital content sales were down 15.8 percent to $69 million for the quarter compared to a year ago. Last year, “The Hunger Games” and “Fifty Shades of Grey” trilogies had a major impact on B&N digital content sales. B&N said that excluding the impact of these two titles, digital content sales decreased 6.9 percent.
Huseby said in a call with investors that there are no plans to use retail revenues to fund the Nook portion of the business. It believes the Nook division will remain self-sufficient and will continue to build its own devices.
“In June, there was a strong message sent that we were shifting toward more of a partnership model of color devices,” Huseby said. “We partner now with large tech companies on color devices on a variety of things … the reason I bring that up is there is opportunity to expand our existing relationship. … The problem is not the devices. The device and hardware and software produced over last year are great devices. Some kind of wholesale outsourcing of our color device business is neither appropriate nor is it smart for the company.”
Huseby added: “If we want to be in content business, we have to be in device business.”
• B&N saw growth of 2.4 percent with its college division and continues to view that is a viable market.
• B&N plans to introduce a new Nook device for the holiday season.
• Nook Press has seen an increase of 150 percent from last year, and has added thousands of new titles.
• B&N plans to have a new website launch next year.
Honestly, I would take a wait and see attitude. The history at B&N is not in their favor regarding technology and eBooks. I agree they need to stay in the game now, because what choice is there? But as to devices…they coold outsource and do just fine, or discontinue at any time. They have a reputation for sudden moves like that, Justlook back to the late 90s and how they dumped thier eBooks so quickly. We sold all our NOOK devices and will watch for what happens. Paper books are fine for now in the meantime, and it looks like their stores could use the sales anyway. Also, the photo is Bill Lynch, NOT Mike Huseby…thought you should know!
I also wondered how long it might be before the wrong CEO was spotted.
B&N’s future is more cloudy that ever and management continue to spin (in different ways). Where is the actual vision? Anyone can get an operational “detail” wrong — like ordering too many devices. Yes, that’s an expensive error — but still reducing prices further 6 months later? That’s management paralysis.
B&N’s retreat from expanding internationally — including into Canada — seems bizarre. If they really have all these excess devices … why not partner with Best Buy in Canada and open this market? For that matter, why not cut a deal with Sony and find marketing synergies or jointly run the ebook operation?
And it’s customer base is actually buy *less*: fewer ebooks sold each quarter. Does anyone believe that is true of Amazon or Kobo?!? What the heck is going on?
Think about their strategic planning sessions. Do you think they feel they can put bookselling print books in the “high growth, high risk” quadrant? They know too much, can see what happened to CompUSA when packaged goods software mostly vanished, Blockbuster, etc. So they circle back to ereaders and ebooks but run right into Amazon, Apple, and Samsung. They are in a strategic pickle and I suspect a sale of all assets to Amazon down the road could be the end game with a greatly reduced store count selling electronics to take on Best Buy, Walmart, and Apple all with integrated retail and direct selling capabilities that offer customers outstanding convenience and value.