Barnes and Noble Reports Declining Profits and Margins
Barnes and Noble, the U.S.' largest bookstore chain, reported a decline in its third quarter profit and projected a fourth quarter which missed analysts' estimates.
Net income dropped to $80.4 million, or $1.40 a share, in the quarter ended Jan. 30 from $81.2 million, or $1.43, a year earlier, the New York-based company said today in a statement. The fourth-quarter loss will be 85 cents to $1.15 a share, the company said. Five analysts estimated a loss of 61 cents, on average, in a Bloomberg survey.
Gross margin, the percentage of sales left after the cost of goods sold, narrowed 370 basis points to 28.3 percent in the quarter. The Barnes & Noble College bookstores bought in September accounted for 270 basis points of the drop because textbooks are less profitable, Chief Financial Officer Joseph Lombardi said on a conference call. A higher percentage of online sales, including digital books and the Nook e-reading device, also ate into margins, he said.
"The main negative was their guidance for the fourth quarter and the gross margin overhang for Barnes & Noble College as well as the Nook," said Michael Souers, an equity analyst with Standard & Poor's in New York. "There's a longer-term impact there that investors are worrying about."
The Nook was a PR disaster for the company, especially in light of Steve Jobs' determination to destroy both the Kindle and the Nook with his iPad. Because of the jobless recovery, it's going to be a tough year ahead for all booksellers.