Close the Book on Barnes and Noble
Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the same time period that e-book sales surpassed hardcover sales in the U.S., Barnes and Noble (NYSE: BKS) reported both a loss overall for the company and decreased revenue in Nook electronic reader sales.
According to a report published by the Association of American Publishers (AAP), American publishers (not booksellers) make more revenue from e-books than hardcover books. Collectively, adult e-books brought in $282.3 million for publishers in Q1, for a 28.4% increase from the same period a year ago. Young adult and children's e-books increased an impressive 233% to $64.3 million.
At Barnes and Noble, digital content sales (defined to include digital books, digital newsstand, and apps) increased 65% for the same (fiscal fourth) quarter and 119% for the full year on a comparable basis, with comparable digital content sales growing to $483 million for the full year.
The AAP also reported that sales of adult hardcover books increased 2.7% to $229.6 million in Q1 2012. Paperback sales brought in $299.8M, a decrease from $335M previously. Barnes and Noble reported retail sales were $1.1 billion for the quarter an increase of 0.5%. Retail sales at the bookseller include more than just books. The company did not break down the difference between book sales and other retail products in the store (coffee, greeting cards, music, etc.).
Overall, it appears book reading is on the rise. The AAP data indicates more reading consumption in general. And yet Barnes and Noble, the largest U.S. traditional retailer, saw a net loss in the quarter of $57.6M ($1.08 per share). The loss is an improvement over the 2011 loss of $59.4 million ($1.04 per share).
It isn't just book reading that's on the rise, it is books read in electronic or digital format that is also increasing. While the bookseller posted an increase in e-book sales, it is questionable that Nook sales fell. The Amazon (NASDAQ: AMZN) Kindle remains the most popular and best selling e-reader tablet. Meanwhile, Barnes and Noble took back Nook Simple Touch inventory. The company said it pulled the Simple Touch in order to make room in the supply chain for new products. However, no company pulls out a product that is selling well. Meanwhile, Kindles are flying off the shelves, and yet the Nook took a loss for the year.
The bookseller announced a deal in April with Microsoft Corp. (NASDAQ: MSFT) to help support the Nook business. Microsoft will invest $300 million to help create a subsidiary for Barnes & Noble’s e-book and college textbook businesses(E-readers for college textbooks specifically are in demand). However, yesterday Microsoft launched its new tablet, Surface, and Barnes and Noble was not a part of it. No word yet on when further details about the partnership will go forward. Considering the deflated balloon of excitement that greeted Surface, it makes one wonder if Microsoft is really the company that can save Barnes and Noble.
There are few positive things to say about Barnes and Noble. The company's stock saw a significant increase after the announcement with Microsoft in April. Since then the stock has steadily fallen back to pre-announcement prices. I see no reason to expect improvements at Barnes and Noble. The company has shown a lack of ability to keep up in the area it should dominate. The largest traditional bookseller should be showing positive numbers during a time when book publishing and reading is on the rise. If a bookseller can't do that, what is the point of its business?
ErinAnnie has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Microsoft. Motley Fool newsletter services recommend Amazon.com and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
