For the past year, Barnes & Noble, Inc. (NYSE:BKS) has been rowing its little boat in unforgiving waters — borne up and down on the waves, but pulled ever on by tireless effort. Unfortunately the little boat also had a full-grown elephant duct-taped to its side — that didn’t help. But now the company has cut the Nook free, and it’s not even pausing to watch the gray trunk sink under as it presses ever forward.
OK, maybe it’s not that dramatic.
The Nook fades away
But there’s no denying that the biggest news to come out of Barnes & Noble, Inc. (NYSE:BKS)’s presentation Tuesday was the demise of the Nook. The business had been sucking cash out of the company, and last fiscal year, the Nook division brought in a $475 million EBITDA loss. That’s a lot of money to lose out the door when you’re competing with a behemoth like Amazon.com, Inc. (NASDAQ:AMZN).
So Barnes & Noble, Inc. (NYSE:BKS) — kind of — canned the Nook. In reality, it’s going to continue to make Nook-branded readers, and it’s going to work with a hardware manufacturer to make Nook tablets, but it’s done making them itself. For the sake of investing, let’s consider the Nook buried for now, and look at what — if anything — Barnes & Noble, Inc. (NYSE:BKS) has to offer.
Bookstores and books
As it turns out, Barnes & Noble, Inc. (NYSE:BKS) actually sells books. Over the same year that the Nook lost $475 million, the retail and college portions of Barnes & Noble, Inc. (NYSE:BKS) generated a combined $485 million in EBITDA. That’s not too bad. It’s also cash that Barnes & Noble can now use to fight the physical battle against Amazon.com, Inc. (NASDAQ:AMZN).
On the earnings call yesterday, management was hesitant to say just what it was going to do with all that new cash, but we can imagine. It could expand into smaller locations, as Best Buy Co., Inc. (NYSE:BBY) has done with its mobile locations. It could issue a dividend, which it hasn’t done for a while. It could buy back shares, while they’re depressed. The options are seemingly endless and all positive.
I’d love to see the money go right back into the business. Amazon.com, Inc. (NASDAQ:AMZN) is still the big dog in the kennel, but it may be losing out on physical book sales. CEO Jeff Bezos said last December’s physical book sales growth was the lowest it had ever been, at 5%. Amazon is clearly making up for that slower growth with fantastic digital content sales, but the physical space is a good opportunity for a revived Barnes & Noble.