More bad news for shareholders of Barnes & Noble (BKS), as the once-charming bookseller continues to deteriorate at the hands of an ever-increasing love of digital media. Specifically, Barnes & Noble swung to a loss last quarter on a 4.5% decline in revenue.
The company remained optimistic, of course, touting the fact that holiday spending thus far is ahead of last year’s tally at this time. But, it may be too little, too late to salvage BKS stock.
The bookseller is getting real low on cash, and if the current quarter is anything but stellar, then Barnes & Noble management will have some tough decisions to make in the coming year.
Barnes & Noble Q2 Results
Last quarter, Barnes & Noble lost $39.2 million, or 52 cents per share, on revenue of $894.7 million.
Neither the top line nor the bottom line compared favorably to expectations or to year-ago levels. The pros were expecting the bookseller to report a loss of only 31 cents per share of BKS on sales of $918 million. In the second fiscal quarter of the previous year, Barnes & Noble earned a profit of twelve cents per share on revenue of $936.5 million.
Same-store sales fell 1%.
Nevertheless, the retailer feels good about how it’s going to end the year. Excluding sales of the fading NOOK, November’s sales through Black Friday were up 1.1% compared to sales for the same period a year earlier.
For the whole year, Barnes & Noble expects same-store sales to be up 1%, and flat when factoring in the NOOK tablet.
The Rest of the Story
While Barnes & Noble is moving backwards, the tepid pace of the backsliding feels palatable; the company should have plenty of time to figure out how to stop the bleeding. It’s not so simple, however, and not just because the company is now booking losses where it had been posting profits.
It’s been a less-touted factoid about fiscal Q2’s numbers, but Barnes & Noble ended the quarter with only $13.4 million in cash. That’s down from the $37.2 million it had in the bank at the end of fiscal Q1, and less than the $31.9 million it was sitting on a of the end of October of 2014.
For the record — and this is an important detail — fiscal Q3 is “the” quarter for Barnes & Noble. Heavy holiday spending drives almost 40% of the company’s annual revenue, and in the recent past has been the only profitable quarter for the retailer, reloading the coffers.
Still, the broad trend has been in decline for years, and even the holiday quarters are increasingly lackluster. Last year’s holiday period only created a net profit of $72.2 million. If the trend continues, the third fiscal quarter of 2015 may not be enough to put a meaningful amount of money back in the bank, as books become more passé and B&N loses even more business to the likes of Amazon.com (AMZN) and other digital media venues.
It begs one key question: What’s Barnes & Noble going to do when it runs out of money (which it will do soon)?
The stock’s supporters continue to think the company will be able to grow its way back to more consistent viability. It’s been more than three years since the top and bottom line started to shrink, though. If there was something B&N could do to quell the slow meltdown, it would have done so by now.
Options include issuing debt, issuing stock or selling assets (or some combination of all three). None of them help support the price of BKS stock, however, nor will more money change the fact that bookstores don’t draw the same crowd they used to.
Bottom Line for BKS Stock
Realistically speaking, the current quarter will at least bear some fruit for Barnes & Noble, putting some much-needed cash in the bank. The question is, how much?
The following three quarters have become net losers for the company, and even a decent fiscal third quarter may no longer be enough to offset the red ink Barnes & Noble will be printing over the course of the first three quarters of 2016.
That’s the ugly reality of the situation. A well-respected brand name alone doesn’t pay the bills.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
