Where Barnes & Noble, Inc. (BKS) Went Wrong

Page 1 of 2

Barnes & Noble, Inc. (NYSE:BKS) invested heavily in its Nook e-reader business, a move that may have been short-sighted and incomplete. After a disappointing holiday season for the company when Nook sales failed to meet expectations, Barnes and Noble reported late Wednesday that Nook EBITDA for its fiscal year will be greater than in fiscal 2012 losses of $262 million.

Where did Barnes and Noble go wrong? And why hasn’t the company kept up with its competition from devices like Apple Inc. (NASDAQ:AAPL)‘s iPad and Amazon.com, Inc. (NASDAQ:AMZN)‘s Kindle, or from the sales of media from these outlets?

Barnes & Noble, Inc. (NYSE:BKS)Based on current forecasts, Barnes and Noble expects the fiscal year 2013 Nook segment EBITDA loss to be greater than it was in fiscal 2012 and Nook Media revenues to be less than $3 billion. The company had anticipated that Nook sales would be about the same as the year previous.

The Nook segment, which consists of the company’s digital business (including e-readers, digital content and accessories), saw revenues of $160 million for the second quarter, increasing 6% as compared to a year ago.  Digital content sales (which include e-books, digital newsstand, and apps) increased 38% for the second quarter over the prior year.

The Barnes and Noble Retail segment, which is primarily physical books sold both in-stores and online, had revenues of $996 million for the second quarter, decreasing approximately 3% over the prior year due to flat comparable store sales, store closures and lower BN.com sales.

In comparison, for the most recent quarter, Apple net sales of the iPad were $10.7 billion. Net sales for iTunes, software and services (which include books, movies, and music) were $3.7 billion in the first quarter of 2013, an increase of $667 million or 22% compared to the first quarter of 2012. What Apple nets in one quarter off content alone, is more than Barnes and Noble makes in the full year for both the e-reader and content sales.

Amazon CEO Jeff Bezos declared that after 5 years of e-book selling, eBooks was a multi-billion dollar category and growing fast. eBooks were up 70% overall in 2012. Amazon doesn’t share actual e-book numbers, or Kindle sales figures, but North American media (which includes e-books, music, and videos) revenues were $2.9 billion for the fourth quarter of 2012 (up 13%) and $9.19 billion for the year (up 15%). International media revenues were $3.6 billion for the quarter and $10.75 billion for the year.  In contrast, Amazon’s physical book sales experienced the lowest December growth rate in 17 years, up by only 5%, according to a statement made by Bezos.

It is hard to compare the three companies on just media, e-book, or tablet sales, when they each report them differently. But what we can see is that Barnes and Noble, lags significantly behind. Barnes and Noble wraps up the revenue from the Nook and digital content into one number, and that number for just one quarter, is still less than half of what the other two companies reported in for just media sales. And Barnes and Noble, in spite of the brick and mortar opportunities, saw a decrease in physical book sales, while Amazon saw growth, albeit low growth.

Where Did it All Go Wrong?

Barnes and Noble was once an American powerhouse. It was once of the most popular places to buy books and music. How did a store that called itself one of the original “big box” stores, fall so far as to rank lowest in book sales out of the booksellers? Where did the company go wrong?

One area the company has not kept up in is music sales. Both Amazon and Apple are thought of as go-to places to download the latest music, and older music as well. Both companies allow for single song downloads as well. Barnes and Noble sells CDs both online and in-store, but does not sell downloads, or single song tracks, on its website.

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

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

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits 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!