Barnes & Noble Drops on Earnings, Surface

by Alyssa Oursler | June 19, 2012 1:51 pm

Barnes & Noble (NYSE:BKS[1]) showed narrowed losses in its fiscal 2012 earnings report released Tuesday morning, but that wasn’t enough to keep shares from dropping around 5% by midday — and news of Microsoft’s (NASDAQ:MSFT[2]) new tablet couldn’t have helped, either.

The net loss for Q4 was $57.7 million, or $1.08 per share — 3% better than last year’s $59.4 million duck into the red, but worse than the loss of 93 cents per share analysts expected for the quarter[3]. Q4 revenues, although up from last year, also failed to meet expectations — analysts predicted $1.47 billion, while B&N brought in $1.38 billion.

Net loss on the year improved 7% from the prior year to $68.9 million, or $1.41 per share.

Sales in the retail segment, which now includes struggling BN.com while Nook sales are reported separately, were slightly up for the quarter but dropped 1.5% to $4.9 billion for the fiscal year.

Also weighing on BKS on Tuesday was the Nook.

The earnings report had plenty of good news: Comparable Nook sales increased 45% for the fiscal year, while digital content sales — including digital books, digital newsstands and the apps business — were up 119%. Quarterly growth metrics were 1% and 65%, respectively.

However, if you remember, Barnes & Noble announced a partnership with Microsoft[4] earlier this year, and Newco — comprised of the company’s Nook digital and college-bookstore businesses — was born. Microsoft’s $300 million investment in the subsidiary provided a bit of hope for the struggling book retailer.

Many thought the partnership was meant to help Barnes & Noble and its Nook compete with Amazon’s (NASDAQ:AMZN[5]) Kindle Fire and Apple’s (NASDAQ:AAPL[6]) iPad — and many expected Microsoft to announce a joint B&N tablet to do just that. Instead, Microsoft flew solo on the project, announcing yesterday the creation of its own tablet[7], the Surface.

Uncertainty about the Nook and B&N’s lackluster earnings prompted investors to drive BKS shares to their lowest point since peaking May 1 on the announcement of Microsoft’s involvement, representing a loss of nearly 30% in roughly two months.

Endnotes:
  1. BKS: http://studio-5.financialcontent.com/investplace/quote?Symbol=BKS
  2. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  3. analysts expected for the quarter: http://www.foxbusiness.com/industries/2012/06/19/barnes-noble-4q-loss-narrows/
  4. announced a partnership with Microsoft: http://investorplace.com/2012/05/how-bns-deal-with-microsoft-could-shake-out/
  5. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  6. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  7. creation of its own tablet: http://investorplace.com/2012/06/microsoft-declares-war-on-the-ipad/

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