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November 20, 2018 at 8:30 AM EST
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Barnes & Noble Reports Fiscal 2019 Second Quarter Financial Results

Best Comparable Store Sales in over Two Years

EBITDA Significantly Improves over the Prior Year

NEW YORK--(BUSINESS WIRE)--Nov. 20, 2018-- Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its fiscal 2019 second quarter ended October 27, 2018.

Total sales for the second quarter were $771 million, declining 2.5% as compared to the prior year. Comparable store sales declined 1.4%, the Company’s best quarterly performance since the fourth quarter of fiscal 2016.

“We saw significant improvement in our second quarter performance, especially notable in our comparable store sales,” said Len Riggio, Chairman of Barnes & Noble, Inc. “While we cannot predict the outcome of the holiday, we are putting our full effort behind our holiday plans, including launching a new ad campaign. We expect this to lead to continued sales improvement during the holiday period.”

The consolidated second quarter operating loss was $26.8 million, as compared to the prior year operating loss of $52.2 million, benefitting largely from expense reductions. The consolidated second quarter EBITDA loss was $2.3 million, as compared to a loss of $25.0 million a year ago, an improvement of $22.7 million over the prior year.

The consolidated second quarter net loss was $27.4 million, or $0.38 per share, as compared to a loss of $30.1 million, or $0.41 per share, in the prior year.

Outlook

For fiscal 2019, the Company continues to expect EBITDA to be in a range of $175 million to $200 million, excluding unusual or non-recurring items.

Conference Call

A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Tuesday, November 20, 2018, and is accessible at investors.barnesandnobleinc.com.

Barnes & Noble, Inc. will report third quarter earnings on or about February 28, 2019.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE: BKS) is the nation’s largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 630 Barnes & Noble bookstores in 50 states, and one of the Web’s premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a lineup of popular NOOK® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store®. The NOOK Store (www.nook.com) features digital books, periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS® and Windows®.

General information on Barnes & Noble, Inc. can be obtained by visiting the Company's corporate website at www.barnesandnobleinc.com.

BKS – Financial

Forward-Looking Statements

This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble’s products, low growth or declining sales and net income due to various factors, including store closings, higher-than-anticipated or increasing costs, including with respect to store closings, relocation, occupancy (including in connection with lease renewals) and labor costs, the effects of competition, the risk of insufficient access to financing to implement future business initiatives, risks associated with data privacy and information security, risks associated with Barnes & Noble’s supply chain, including possible delays and disruptions and increases in shipping rates, various risks associated with the digital business, including the possible loss of customers, declines in digital content sales, risks and costs associated with ongoing efforts to rationalize the digital business, risks associated with the eCommerce business, including the possible loss of eCommerce customers and declines in eCommerce sales, the risk that financial and operational forecasts and projections are not achieved, the performance of Barnes & Noble’s initiatives including but not limited to new store concepts and eCommerce initiatives, unanticipated adverse litigation results or effects, potential infringement of Barnes & Noble’s intellectual property by third parties or by Barnes & Noble of the intellectual property of third parties, and other factors, including those factors discussed in detail in Item 1A, “Risk Factors,” in Barnes & Noble’s Annual Report on Form 10-K for the fiscal year ended April 28, 2018, and in Barnes & Noble’s other filings made hereafter from time to time with the SEC.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this communication.

       
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                 
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
October 27, 2018   October 28, 2017 October 27, 2018   October 28, 2017
 
Sales $ 771,188 $ 791,117 $ 1,565,964 $ 1,644,433
Cost of sales and occupancy 545,841   562,422   1,112,545   1,162,257  
Gross profit 225,347   228,695   453,419   482,176  
Selling and administrative expenses 227,659 253,728 448,047 496,023
Depreciation and amortization 24,448   27,199   48,333   53,597  
Operating loss (26,760 ) (52,232 ) (42,961 ) (67,444 )
Interest expense, net 3,432   2,678   6,684   4,718  
Loss before taxes (30,192 ) (54,910 ) (49,645 ) (72,162 )
Income tax benefit (2,798 ) (24,816 ) (5,213 ) (31,290 )
Net loss $ (27,394 ) $ (30,094 ) $ (44,432 ) $ (40,872 )
 
Loss per common share:        
Basic $ (0.38 ) $ (0.41 ) $ (0.61 ) $ (0.56 )
Diluted $ (0.38 ) $ (0.41 ) $ (0.61 ) $ (0.56 )
 
Weighted average common shares outstanding:
Basic 72,935 72,597 72,811 72,525
Diluted 72,935 72,597 72,811 72,525
 
Dividends declared per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30
 
Percentage of sales:
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales and occupancy 70.8 % 71.1 % 71.0 % 70.7 %
Gross profit 29.2 % 28.9 % 29.0 % 29.3 %
Selling and administrative expenses 29.5 % 32.1 % 28.6 % 30.2 %
Depreciation and amortization 3.2 % 3.4 % 3.1 % 3.3 %
Operating loss -3.5 % -6.6 % -2.7 % -4.1 %
Interest expense, net 0.4 % 0.3 % 0.4 % 0.3 %
Loss before taxes -3.9 % -6.9 % -3.2 % -4.4 %
Income tax benefit -0.4 % -3.1 % -0.3 % -1.9 %
Net loss -3.6 % -3.8 % -2.8 % -2.5 %
 

 
BARNES & NOBLE, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)
                   
       
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
October 27, 2018   October 28, 2017 October 27, 2018   October 28, 2017
 
Sales  
Retail $ 753,185 $ 769,709 $ 1,528,903 $ 1,599,745
NOOK 21,763 25,964 47,033 55,464
Elimination   (3,760 )   (4,556 )   (9,972 )   (10,776 )
Total $ 771,188   $ 791,117   $ 1,565,964   $ 1,644,433  
 
Gross Profit
Retail $ 214,316 $ 214,436 $ 430,617 $ 453,326
NOOK   11,031     14,259     22,802     28,850  
Total $ 225,347   $ 228,695   $ 453,419   $ 482,176  
 
Selling and Administrative Expenses
Retail $ 217,670 $ 239,630 $ 428,561 $ 467,951
NOOK   9,989     14,098     19,486     28,072  
Total $ 227,659   $ 253,728   $ 448,047   $ 496,023  
 
EBITDA
Retail $ (3,354 ) $ (25,194 ) $ 2,056 $ (14,625 )
NOOK   1,042     161     3,316     778  
Total $ (2,312 ) $ (25,033 ) $ 5,372   $ (13,847 )
 
Depreciation and Amortization
Retail $ (21,888 ) $ (24,117 ) $ (43,166 ) $ (47,196 )
NOOK   (2,560 )   (3,082 )   (5,167 )   (6,401 )
Total $ (24,448 ) $ (27,199 ) $ (48,333 ) $ (53,597 )
 
Operating Loss
Retail $ (25,242 ) $ (49,311 ) $ (41,110 ) $ (61,821 )
NOOK   (1,518 )   (2,921 )   (1,851 )   (5,623 )
Total $ (26,760 ) $ (52,232 ) $ (42,961 ) $ (67,444 )
 
Net Loss
Operating loss $ (26,760 ) $ (52,232 ) $ (42,961 ) $ (67,444 )
Interest expense, net (3,432 ) (2,678 ) (6,684 ) (4,718 )
Income tax benefit   2,798     24,816     5,213     31,290  
Total $ (27,394 ) $ (30,094 ) $ (44,432 ) $ (40,872 )
 
 
 
Percentage of sales:
 
Gross Margin
Retail 28.5 % 27.9 % 28.2 % 28.3 %
NOOK   61.3 %   66.6 %   61.5 %   64.6 %
Total 29.2 % 28.9 % 29.0 % 29.3 %
 
Selling and Administrative Expenses
Retail 28.9 % 31.1 % 28.0 % 29.3 %
NOOK   55.5 %   65.9 %   52.6 %   62.8 %
Total 29.5 % 32.1 % 28.6 % 30.2 %
 
EBITDA
Retail -0.4 % -3.3 % 0.1 % -0.9 %
NOOK   5.8 %   0.8 %   8.9 %   1.7 %
Total -0.3 % -3.2 % 0.3 % -0.8 %
 
Depreciation and Amortization
Retail 2.9 % 3.1 % 2.8 % 3.0 %
NOOK   14.2 %   14.4 %   13.9 %   14.3 %
Total 3.2 % 3.4 % 3.1 % 3.3 %
 
Operating Loss
Retail -3.4 % -6.4 % -2.7 % -3.9 %
NOOK   -8.4 %   -13.6 %   -5.0 %   -12.6 %
Total -3.5 % -6.6 % -2.7 % -4.1 %
 

 
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
         
  October 27, 2018   October 28, 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 11,192 $ 11,324
Receivables, net 63,718 73,903
Merchandise inventories, net 1,145,700 1,177,080
Prepaid expenses and other current assets   77,938     141,244  
Total current assets   1,298,548     1,403,551  
 
Property and equipment:
Land and land improvements 2,541 2,541
Buildings and leasehold improvements 1,090,505 1,076,591
Fixtures and equipment   1,550,430     1,644,472  
2,643,476 2,723,604
Less accumulated depreciation and amortization   2,384,361     2,451,675  
Net property and equipment   259,115     271,929  
 
Goodwill 71,593 207,381
Intangible assets, net 309,419 309,860
Other non-current assets   17,484     9,967  
Total assets $ 1,956,159   $ 2,202,688  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 621,579 $ 656,620
Accrued liabilities 267,479 280,905
Gift card liabilities   214,352     327,217  
Total current liabilities   1,103,410     1,264,742  
 
Long-term debt 278,325 242,833
Deferred taxes 72,147 83,785
Other long-term liabilities 85,842 95,155
 
Shareholders' equity:
Common stock; $0.001 par value; 300,000 shares authorized;
112,752 and 112,226 shares issued, respectively 112 112
Additional paid-in capital 1,751,258 1,745,822
Accumulated other comprehensive income 276 315
Retained earnings (212,684 ) (108,383 )
Treasury stock, at cost, 39,732 and 39,580 shares, respectively   (1,122,527 )   (1,121,693 )
Total Barnes & Noble, Inc. shareholders' equity   416,435     516,173  
Commitments and contingencies   -     -  
Total liabilities and shareholders' equity $ 1,956,159   $ 2,202,688  
 

       
BARNES & NOBLE, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share
(In thousands, except per share data)
(Unaudited)
                 
 
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
October 27, 2018 October 28, 2017 October 27, 2018 October 28, 2017
Numerator for basic loss per share:
Net loss $ (27,394 ) $ (30,094 ) $ (44,432 ) $ (40,872 )
Less allocation of dividends to participating securities   (23 )   (27 )   (44 )   (38 )
Net loss available to common shareholders $ (27,417 ) $ (30,121 ) $ (44,476 ) $ (40,910 )
 
Numerator for diluted loss per share:        
Net loss available to common shareholders $ (27,417 ) $ (30,121 ) $ (44,476 ) $ (40,910 )
 
Denominator for basic and diluted loss per share:
Basic and diluted weighted average common shares 72,935 72,597 72,811 72,525
 
Loss per common share:        
Basic $ (0.38 ) $ (0.41 ) $ (0.61 ) $ (0.56 )
Diluted $ (0.38 ) $ (0.41 ) $ (0.61 ) $ (0.56 )
 

 
BARNES & NOBLE, INC. AND SUBSIDIARIES
Non-GAAP Reconciliation & Forward-Looking Statement
(In millions)
(Unaudited)
             
       
Forward-Looking Fiscal 2019
 
EBITDA (a) $ 175 $ 200
Depreciation and amortization   (100 )   (100 )
Operating income $ 75   $ 100  
 
 
(a) Excludes any unusual or non-recurring items.

Source: Barnes & Noble, Inc.

Media:
Mary Ellen Keating
Senior Vice President
Corporate Communications
Barnes & Noble, Inc.
(212) 633-3323
mkeating@bn.com

Investor:
Andy Milevoj
Vice President
Investor Relations and Corporate Finance
Barnes & Noble, Inc.
(212) 633-3489
amilevoj@bn.com