Barnes & Noble suffered a drop in revenue in all three of its major divisions â€" retail, college and Nook â€" for its fiscal third quarter, the company reported Thursday morning. But the falloff in the Nook segment, which includes digital tablets and e-readers, was particularly steep, showing a 26 percent decline in revenues.
The company said earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter ending Jan. 26 were $55 million, compared with $150 million for the same period a year ago. Consolidated net losses were $6.1 million, compared with net earnings of $52 million a year ago.
The nation’s largest bookstore chain had warned earlier in the month that sales of Nook were disappointing and executives had hinted that the company’s strategy of competing in the highly competitive tablet space had run its course.
On Monday, Leonard Riggio, the company’s largest stockholder and the architect of the company’s ferocious and successful retail expansion n the 1980s and 1990s, announced that he was considering buying Barnes & Noble’s retail operation. Some analysts cheered this announcement because they felt the digital unit, meant to be the company’s savior, was in fact dragging down the worth of the retail stores, which for now remain a viable operation.
That notion got some support with the earnings report. The company saw a decrease in retail sales of more than 10 percent, largely due to store closings. But Barnes & Noble had largely anticipated the lower revenue and despite the sales decline, retail earnings increased 7.3 percent, to $212 million, “resulting from a higher sales mix of higher margin core products and expense management,†the company said.
Meanwhile, revenues in the Nook unit plunged by 26 percent, to $316 million for the quarter, compared with $426 million last year. Losses more than doubled, to $190 million compared to $83 million a year ago. The losses were largely due to lower ! than anticipated sales, inventory charges and higher operating expenses because of advertising costs, the company said.
One bright note was that digital content sales through the Nook unit increased 6.8 percent over the previous year.
The company said that Nook was already implementing a cost reduction program.
“In terms of the NOOK Media business, we’ve taken significant actions to begin to right size our cost structure in the NOOK segment, while also taking a large markdown on NOOK devices in order to enhance our ability to achieve our estimated sales plans in subsequent quarters,†William Lynch, chief executive of Barnes & Noble, said in a written statement.
Still, Mr. Lynch emphasized that the company was not abandoning the Nook division or the digital devices. “NOOK Media has been financing itself since October of 2012 due to the strong investment partners we’ve been able to attract in Microsoft and Pearson,†he said. “Coming off the holiday shortfall, we’re in te process of making some adjustments to our strategy as we continue to pursue the exciting growth opportunities ahead for us in the consumer and digital education content markets.â€
