Not just the Nook
If Barnes and Noble’s woes were just related to the Nook and the market, the company might have a fighting chance. It doesn’t. B&N is also struggling to stay relevant (read: profitable) in its core business of bookselling.
Studies show that Barnes & Noble’s market share slipped another 2% in 2012, to a record low of just 16%. And things don’t appear any better in 2013. Earnings targets gravely missed in the second quarter, sending the share price down 17% in one day. The company’s sales figures tat came in about 10% lower than last quarter’s, at a staggering loss of $2.54 per share.
In addition to its slipping book sales, Barnes & Noble’s leadership seems to be giving up. Barnes & Noble’s CEO William Lynch resigned on July 8 amid the bookseller’s many troubles. Lynch hinted that failure to meet strategic objectives caused his exit. If he’s willing to give up on the company, maybe investors should be moved to do the same.
Consider wisely
Am I being a bit too pessimistic about Barnes & Noble, Inc. (NYSE:BKS)? Maybe so, maybe not.
As of April 2013, B&N had $160 million in the bank and $77 million in debt. New debt issuance aside, when you consider the fact that B&N is chewing up $714 million per month in expenses, and operating at a loss, the picture looks quite bleak.
In fact, for a (very) rough estimate of the company’s life expectancy, divide Barnes & Noble’s net cash by its monthly net losses. The answer of four months of cash left reveals that a major problem. Obviously, this metric doesn’t capture the timing of cash charges, nor account for non-cash depreciation charges. But the metric gives a back-of-the-envelope idea of Barnes & Noble’s poor health.
I believe that Barnes & Noble, Inc. (NYSE:BKS) is just starting its descent. Its share price plummeted more than 20% since the last earnings release on June 25. Believe me, I’d much rather be writing about a great opportunity to buy shares on the cheap. But, alas, here I am writing about why not to buy these dreadful shares on the cheap.
The article 3 Reasons This Retailer Won’t Make It Through Next Year originally appeared on Fool.com and is written by Marie Palumbo.
This article was written by Ian Finney and edited by Chris Marasco. Chris Marasco is Head Editor of ADifferentAngle. Neither has a position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Marie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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