By Danni Santana
Perhaps no company has felt the wrath of e-commerce more than Barnes & Noble. Chief competitors Amazon and Chegg have successfully hijacked customers by way of cheaper rental and purchase options of books online.
Meanwhile, Barnes & Noble’s struggles operating its NOOK digital business indicates the company is not yet able to compete with Apple Inc.’s iPad or Amazon’s Kindle. Such problems caused the company to close 13 stores in 2014, with more planned by year’s end.
On Wall Street, Barnes & Noble stock is down 15 percent for the year, currently trading at $13.26. Its stock price dropped 28 percent– or $4.50– on Sept. 9 after the company announced a 1.5 percent decrease in sales for the first quarter of the fiscal year, a net loss of $34.8 million. The stock managed to rebound 7.5 percent the following day.
And yet, B&N executives still expect the book retailer to turn things around. If nothing else, Barnes & Noble has committed to finding a new model for its in-store business to improve revenue, focusing on in-house events and the selling of toys and games, which were up 17.5 percent last quarter.
Here, then, are some more reasons to hold off selling your stake in Barnes & Noble.
- Barnes & Noble’s Education Spinoff
In August, Barnes & Noble Education began publically trading on Wall Street, with a goal of maximizing its college presence, which includes 736 campus bookstores. The move at the very least gives Barnes & Noble’s struggling retail and digital divisions more financial flexibility.
“While the retail bookstore network is shrinking due to the ongoing progression to online sales and e-book distribution, Barnes & Noble has consistently added to its college bookstore system through new contracts with colleges nationwide,” Odeon Capital Group wrote in a report published in July about the spinoff.
- New CEO Ronald Boire promises to boost retail
Ronald Boire’s first day as CEO was Sept. 8, succeeding Michael Huseby who is now executive chairman of Barnes & Noble Education. His expertise in retail, having worked at Brookstone and Best Buy in the past, confirmed Barnes & Noble would continue its efforts to expand its retail business, its biggest, and reignite book sales.
“We will further integrate our stores, website and NOOK business to create a strong omni-channel presence that gives our customers the ability to buy any book anywhere, anytime and in any format,” said Boire, who came to the retailer from Sears Canada, on an earnings call Sept. 9.
Earlier this month, Barnes & Noble, in partnership with Samsung, released the Samsung Galaxy Tab S2 NOOK shortly after the debut of its new website, which promises to be more user friendly.
- Physical books are Barnes & Noble’s saving grace
The one bright spot of Barnes & Noble’s recent earnings report shows a 1.1 percent increase in comparable store sales last quarter, thanks to the much-anticipated release of Harper Lee’s novel “Go Set a Watchman”, which sold over one million copies the first week.
The retailer expects popular fall releases “Killing Reagan” by Bill O’Reilly and David Lagercrantz’s “The Girl in the Spider’s Web”, a continuation of Steig Larsson’s “The Girl with the Dragon Tattoo” series to boost sales as well, according to the Sept. 9 earnings call transcript.
- Barnes & Noble is no Borders
Despite its struggles, Barnes & Noble has no debt and plenty of cash to work with. When the recession hit in 2008-09, long-time rival Borders was already $350 million in debt. E-commerce finally drove the bookstore out of business in 2011.
While e-commerce has undoubtedly hurt Barnes & Noble, the company continues to cut the expenses of its NOOK, down $10 million from the same period last year. NOOK sales plunged 22 percent last quarter, helping contribute to an overall 28 percent decline in digital sales.
The dip in sales, however, is less than the 54.3 percent decline reported last year. Even so, Barnes & Noble’s future as a company heavily depends on it fixing its digital NOOK division before it’s too late. In a report cited by CNNMoney, Neil Saunders, CEO of research firm Conlumino, wrote that Boire and Barnes & Noble must come up with a coherent digital strategy.
“These determinations are ones that need to be made quickly and prudently if B&N is to survive over the longer term,” he added.