Shares of Barnes & Noble, Inc. (NYSE:BKS) plummeted more than 17% Tuesday after the company turned in dismal fiscal fourth-quarter results. But does this mean all hope is lost for the struggling company to survive over the long term?
First, some perspective
Back in February, I wondered just how many strikes Barnes & Noble, Inc. (NYSE:BKS) would get until it finally threw in the towel.
To be sure, the company had just performed an about-face from its previously optimistic comments regarding the Nook segment, warning investors to expect an fiscal 2013 EBITDA loss from Nook Media that would exceed the segment’s $262 million loss in 2012.
Even so, I also noted that Barnes & Noble, Inc. (NYSE:BKS)’s core comparable-store sales — which excludes sales of Nook products — actually exceeded the company’s expectations by falling only 3.1%. What’s more, Barnes & Noble did have around $471 million in cash with a relatively manageable debt-to-equity ratio of 0.28 at the end of its previous quarter, so it looked unlikely that the beleaguered bookseller would be going bankrupt anytime in the immediate future.
Fast-forward to Tuesday’s results, and Barnes & Noble, Inc. (NYSE:BKS)’s consolidated fourth-quarter revenue decreased 7.4% to $1.3 billion. In addition, its consolidated fourth-quarter net loss was $118.6 million, or more than double last year’s $56.9 million loss. Fourth-quarter net losses per share, on the other hand, came in at $2.11, compared to a net loss of $1.06 per share during the company’s fiscal 2012.
Sure enough, it turns out the Nook segment ended up costing Barnes & Noble a whopping $475 million during fiscal 2013, or nearly 82% more than last year’s aforementioned EBITDA loss.
In the meantime, while the core Retail segment’s earnings did mange to grow 16% for the full-year 2013 to $374 million, its fourth-quarter results were less than compelling, with EBITDA falling 23.9% to $51 million. Fourth-quarter Retail revenue, for its part, dropped 10% to $948 million, hurt by store closures, lower online sales, and a painful comparable-store sales drop of 8.8%.
According to the folks at Barnes & Noble, Inc. (NYSE:BKS), those comparable-store sales decreases were caused primarily by “lower Nook unit volume and a stronger title lineup in the prior year period including The Hunger Games and Fifty Shades of Grey trilogies.” And though digital sales did increase 16.2% for the full year, they actually decreased 8.9% for the fourth quarter, Barnes & Noble says, thanks again to a tough act to follow after those pesky popular trilogies last year.
Call me a skeptic, but…
To me, it seems a tad silly to place the blame on last quarter’s mediocre book selection.
Of course, I suppose Barnes & Noble, Inc. (NYSE:BKS) wouldn’t necessarily want to point out the fact that they were tardy, to say the least, in finally introducing in-app purchasing on the Nook at the end of March. Or maybe, just maybe, it could be that the Nook is ridiculously outmatched by two superior tablet alternatives offered to consumers in the form of Amazon.com, Inc. (NASDAQ:AMZN)‘s Kindle devices and Apple Inc. (NASDAQ:AAPL)‘s iPad lineup.