Barnes & Noble (BKS), the largest bookstore chain in the U.S., can’t seem to shake its long-lasting problems. BKS stock, which was actually sitting on 5.8% year-to-date gains before today’s inauspicious opening, is now down roughly 10% on the year after today’s 15% intraday drop.
The sluggish first fiscal quarter results clearly came as a surprise to the market today, which was expecting earnings per share of 12 cents on revenue of $1.22 billion. While revenue was in-line last quarter, BKS stock got slammed as the company posted a net loss of 68 cents per share.
It wasn’t exactly what investors wanted to hear, especially at a time when Barnes & Noble’s competition with Amazon (AMZN) has never been more fierce.
Nothing to Brag About
Revenue was off 1.5% year over year, but that’s not too shocking; it was the fifth straight quarter of declining revenue for the once-mighty bookstore chain.
Sales at retail stores fell 1.7% year over year, despite a 1.1% increase in same-store sales. How does that make sense? Well, sales aren’t exactly primed to go up when you’re closing locations left and right. Retail locations are now the crux of the BKS narrative, with $938 million of the company’s $1.22 billion in revenue coming from that segment.
It’s true that the college division was still relevant last quarter, hauling in $238 million in revenue, an increase of 5.7% from the same quarter a year ago. Too bad BKS is spinning off the one and only segment of its business that’s actually growing, and future quarters won’t reflect those results anymore.
What about the company’s e-reader? Did the Nook come to the rescue? As you might’ve guessed, no, it did not. In fact, it crashed and burned. Sales tumbled from $70 million a year ago to just $54.3 million last quarter, a 22% decline.
I’m afraid the outlook for BKS stock is just as bleak as it was back in February, when the company announced its decision to spin off its education business, painted as a burgeoning company trapped within a flailing bookseller trapped in the past.
Ever the cynic, I waxed pessimistic on Barnes & Noble stock as the market applauded the announcement to the tune of 7% one-day gains:
“In reality, BKS stock has been dead money for years. Neither its traditional brick-and-mortar retail segment or its ill-fated Nook division offer any solace for investors, whose only hope now is to pray for more arcane finance tricks from the doomed bookstore.
Or, hope for a buyout, a la Books-A-Million, Inc. (NASDAQ:BAMM).”
Listen, it’s great (I guess) that Barnes & Noble was able to match revenue expectations. But, its not exactly every quarter you catch a boost from a new Harper Lee novel, which was in fact cited as a driver of BKS’ meager 1% same-store sales growth.
I still see BKS stock as an uninvestible company, mainly because a bookseller that’s seeing declining online sales and a languishing e-reader division just won’t cut it in today’s economy.
Stay far away from this stock. Taking a loss always hurts, but bigger losses hurt more, and hope isn’t a strategy.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
