TeleRead Asks: Why is Barnes & Noble Losing?
January 4, 2013 | 3:18 pm
By Dan Eldridge
To most readers, it probably seems unthinkable that Barnes & Noble and its Nook Media division might not be around at this time next year. But after B&N announced its embarrassingly low holiday season sales figures yesterday (scroll down to read the press release), that’s essentially what every media outlet covering the news seemed to be suggesting.
After thumbing through a few of the stories and considering the facts myself, I’ve got to say that my own personal faith in the company’s future isn’t exactly booming—quite the opposite, in fact.
If you’re not current on the story yourself, here’s the nut graf from a New York Times item about the news, which explains it succinctly:
“Retail sales from the company’s bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.” —Leslie Kaufman
With the above in mind, here’s my prediction:
- At some point in 2013, B&N will either steer its business in a relatively new direction (focusing primarily on the education market, for instance), in which case they’ll manage to stay financially afloat, or…
- B&N and the Nook unit will continue battling with the other digital Seven Sisters for marketplace dominance, in which case they’ll lose to Amazon and/or Google, one of whom will probably scoop them up for a song.
I’ve heard all the standard explanations: Their digital ecosystem is too limited; the website isn’t easy enough to navigate; the customer service is poor, and so on. (Interestingly enough, you don’t often hear e-reading enthusiasts suggesting that Nook tablets are of poor quality. In fact, they’re generally praised for their open systems.)
At any rate, we’re genuinely curious to know what our readers think about the B&N situation, so here are our questions:
¶ What do you think B&N and the Nook unit need to do—or what do you think they need to do differently—in order to save the company from what seems to be an almost inevitable downward slide to the bottom of the heap?
¶ What major mistakes, if any, do you think B&N and/or the Nook unit have made over the past few years that have led the company to its current position?
Barnes & Noble Reports Holiday Sales Results
New York, NY (January 3, 2013)—Barnes & Noble, Inc. (NYSE:BKS) today reported holiday sales for the nine-week holiday period ending December 29, 2012.
The Retail segment, which consists of the Barnes & Noble bookstores and BN.com businesses, had revenues of $1.2 billion, decreasing 10.9% over the prior year. This decrease was attributable to an 8.2% decline in comparable store sales, store closures and lower online sales. Core comparable store sales, which exclude sales of NOOK products, decreased 3.1% as compared to the prior year due to lower bookstore traffic. Sales of NOOK products in the Retail segment declined during the holiday period due to lower unit volume and average selling prices.
While Retail sales of NOOK products fell short of the company’s expectations, bookstore sales of core products exceeded the company’s expectations, and therefore, the company continues to expect fiscal year 2013 Retail comparable bookstore sales to decline on a percentage basis in the low- to mid-single digits.
The NOOK segment, which consists of the company’s digital business (including Readers, digital content and accessories), had revenues of $311 million for the nine-week holiday period, decreasing 12.6% as compared to a year ago. Digital content sales increased 13.1%, while NOOK device unit sales declined during the holiday period as compared to the prior year. Digital content sales are defined to include digital books, digital newsstand, and the apps business.
"We entered the holiday with two great new products, NOOK HD and NOOK HD+, both highly rated media tablets of phenomenal quality," said William Lynch, Chief Executive Officer of Barnes & Noble, Inc. "NOOK device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday. We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward."
As a result of the NOOK sales shortfall, the company now expects fiscal year 2013 NOOK Media revenues of approximately $3 billion, and NOOK segment EBITDA losses at a comparable level to fiscal year 2012.
The Company has made significant investments over the past three years building the valuable NOOK digital retailing platform, which has resulted in millions of digital customers buying content from Barnes & Noble. The company’s digital strategy will continue to center around delivering the best digital reading, shopping and content experience in the market, while also being diligent about calibrating expenses to business trends in order to scale the business to profitability over time.