B&N: 'Turnaround Plans Take Time'

Wall Street reacted negatively to Barnes & Noble's disappointing fourth quarter and fiscal 2018 results (sales fell 6% and the net loss was $125.5 million), announced yesterday. In twice the usual volume, B&N stock fell 3.9%, to $6.20 a share. The company's market capitalization is $450 million and its yield is 10%.

In a conference call with analysts after the results were released (transcript courtesy of SeekingAlpha), B&N CEO Demos Parneros said that the company has been working hard for some time on reversing its fortunes, but "turnaround plans take time.... [Still, we] have laid the groundwork for the future and we are beginning to see modest improvement in some areas."

He cited at length various positive changes:

  • "Store conversion rates" improved during fiscal 2018.
  • B&N's membership program grew by 500,000 members.
  • At cafes open at least a year, sales rose in the latter part of the fiscal year.
  • The company has developed "a pipeline of real estate opportunities" that should allow it to have a net increase in store count next year, with ideal new stores at about 14,000 square feet and maintaining B&N's presence in "key markets."
  • The company launched its ship-from-store program.
  • The Barnes & Noble Book Club launched in May.
  • Tim Mantel was hired as chief marketing officer, among other "key hires" in the last few years to the management team.
  • The exclusive and signed editions program will be expanded to more holidays.
  • A business development team was formed and focuses on "creating a pipeline of fresh new concepts to engage our customers" such as new back-to-school products available in July.
  • The company's "new, more efficient store labor model... resulted in a $40 million cost reduction," and the company is reviewing other cost-cutting possibilities.

CFO Allen Lindstrom added more details about the results of store categories in the past year. Sales of books at stores open at least a year fell 3.4% in the fourth quarter, while all non-book categories fell 4.5%.

Gift, music and DVD business had "double-digit declines, partially offset by favorable trends in our café and toys and games categories."

Online sales dropped 9.6% during the year.

B&N's next quarterly report will be in early September.

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