Barnes & Noble, Inc. (BKS)’s Nook Business Is Struggling, But Can it Recover?

Page 1 of 2

The shift to digital technology is affecting nearly all the industries across the board. Few would have thought that even the book-selling business could become a culprit of the advances in technology. Nonetheless, this is what is happening to Barnes & Noble, Inc. (NYSE:BKS).

Barnes & Noble, Inc. (NYSE:BKS)The company has been trying to position itself for the future with its investment in Nook Media and in partnership with Microsoft Corporation (NASDAQ:MSFT) and Pearson PLC (ADR) (NYSE:PSO), a London-based bookseller. However, Barnes & Noble, Inc. (NYSE:BKS)’s Nook business has struggled to keep up with competition from Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) , which are setting the standards in the tablet business.

Last year, Microsoft Corporation (NASDAQ:MSFT) and Pearson PLC (ADR) (NYSE:PSO) invested in Nook Media, prompting the media to suggest that Barnes & Noble, Inc. (NYSE:BKS)’s Nook business was the future of the bookseller’s digital book sales. However, based on the most recent quarter results, it seems as though that dream is all but dead.

What happened?

In the company’s most recent results, sales from Barnes & Noble, Inc. (NYSE:BKS)’s Nook business plunged 34% year-over-year, while revenue from Barnes & Noble Retail, including BN.Com, declined 10% from the same period a year ago. The 34% decline in Nook sales follows the 26% fall reported in the company’s FQ3, ended January 31.

The decline in B&N retail sales is attributable to the massive fall in the Nook business, which should have boosted digital book sales. This comes at a time after the digital book industry grew 43% in 2012. This indicates that Barnes & Noble, Inc. (NYSE:BKS) failed to rally along with the industry, as the paradigm shift to digital technology in the reading business continues to advance.

The results from the Nook business also affected the overall performance of the company as the company’s loss from continuing operations increased to $122 million, the largest in its history. However, the 8.8% decline in same store sales depicts how the unit once thought to be the savior isn’t doing well.

So what happens now?

The Nook HD+ tablets have no place in the tablet industry. Apple Inc. (NASDAQ:AAPL)’s iPad mini and Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire HD are definitely miles ahead of the Nook. Despite being the cheapest among the trio, the Nook has lost business to these industry giants, which already operate under a strong brand.

This is perhaps the reason why Barnes & Noble has sought to offer its Nook devices to an unnamed third party, which begs the question whether the company would be able to sustain its digital book business going forward. This move also signals that the company has admitted defeat in the tablet battlefield.

Barnes & Noble’s strategic positioning for the future seems to have failed with the fall of Nook Media. There is no short-cut to this, as digital readership forms the future of learning. Soon, even libraries may switch completely to digital reading.

It seems as though Barnes & Noble might have to rely on third-party tablets in its e-reading business. Microsoft, already a strategic partner in the company’s Nook business, seems to be a good candidate with its Surface RT tablets. However, its minute market share may not offer a lot in terms of addressable market. Apple on the other hand, holds the lion’s share of the market in the tablet business with its iPads accounting for approximately 40%.

Amazon, the world’s largest online retailer, began as an online bookstore, but later diversified to DVDs, CDs, Video, and MP3. Its Kindle Fire business came to life as part of a strategic plan to spur growth in its reading business. The company continues to struggle for reporting good margins from the unit, as it dwells on competitive pricing to try to capture some market share from Apple and Samsung. Amazon currently has a market share of 3.7% according to IDC’s Q1, 2013 data.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!