Barnes & Noble Swings To Profit In Q3, To Launch New Nook Color Device

(RTTNews) - Bookstore chain Barnes & Noble Inc. (BKS) on Wednesday reported a turnaround to profit in the third quarter as a decline in expenses as well as improved margins more than offset lower sales. Looking ahead, the company reiterated its fiscal 2014 guidance and said it plans to launch a new Nook color device in early fiscal 2015.

The New York-based company's net income available to common shareholders for the third quarter was $60.89 million or $0.86 per share, compared to net loss of $8.36 million or $0.14 per share in the year-ago period.

On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.61 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated sales for the quarter declined 10 percent to $2.00 billion from $2.22 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $2.01 billion.

The company's gross margin for the quarter rose 530 basis points to 30.2 percent from last year's 24.9 percent.

Selling and administrative expenses declined 13 percent from the year-ago period to $430.37 million, while depreciation and amortization expenses decreased 3 percent to $54.36 million.

Barnes & Noble retail store sales, which consists of the Barnes & Noble bookstores and BN.com businesses, decreased 6 percent from the year-ago period to $1.41 billion. This reflects a comparable store sales decline of 4.9 percent, store closures and lower online sales. Comparable store sales declined primarily due to lower sales of Nook products.

Excluding sales of Nook products, core comparable bookstore sales decreased 0.5 percent for the quarter.

Meanwhile, Barnes & Noble College sales declined 6 percent to $486.2 million, and comparable store sales declined 4 percent.

The results were impacted by a higher mix of lower priced used-textbook rentals and lower textbook sales volume, partly offset by higher general merchandise sales. The company noted that the spring back-to-school rush season extended past the close of the company's fiscal third quarter.

The company's Nook segment, which includes devices, digital content and accessories, reported a 50 percent decline in revenues from last year to $156.9 million.

Of this, device and accessories sales decreased 58 percent on lower unit selling volume as well as lower average selling prices. Digital content sales were down 27 percent from last year, primarily due to lower device unit sales.

Michael Huseby, chief executive officer of Barnes & Noble, said, "Nook losses narrowed significantly as we achieved our objective of selling through much of our pre-holiday device inventory, while managing promotions to optimize sales."

Huseby added that Barnes & Noble was actively engaged in talks with several world-class hardware partners related to device development as well as content packaging and distribution. As a result, the company plans to launch a new Nook color device in early fiscal 2015.

Looking ahead to fiscal 2014, Barnes & Noble reaffirmed its guidance, in which it expects retail comparable store sales to decline in the high single digits, core retail comparable bookstore sales to decline in the low- to mid-single digits, and college comparable store sales to decline in the low single digits.

In Wednesday's regular session, BKS is trading at $18.64, up $0.92 or 5.19 percent on a volume of 529,011 shares.