Barnes & Noble reported sales of $1.1 billion for their third quarter, and a net loss of $18.4 million. Same-store BN store sales of $971 million were down a big 7.4 percent (and fell 4.4 percent overall), while sales at the online unit rose 2 percent, to $109 million. The loss includes a special after-tax impairment charge of $7 million “to reduce the asset carrying value of certain store locations.”
The results are below the company’s previous guidance and analysts’ diminished expectations–the operating loss of .21 a share compares to analysts’ prediction of .16 share. BN reduced their fourth quarter and full year guidance as a result, noting “it is difficult to forecast sales with any certainty in the current retail environment,” now expecting another 6 to 9 percent same-store decline for the final quarter. That would leave full-year sales down 5 to 6 percent on a same-store basis, with earnings of $1.30 to $1.60 a share.
CEO Steve Riggio says “a significant drop off in customer traffic and consumer spending impacted our business.” But he adds, “On a positive note, our gross margins continue to hold up well. We have scrupulously avoided driving unprofitable top line sales growth with additional coupon promotions and extra discounting. Additionally, the company remains focused on producing cash flow. We are managing our working capital efficiently, which is evident in the reduction of $107 million of inventory compared to last year.” They will maintain their dividend of .25 a share.
In this morning’s conference call, the company declared “traffic is the story for the quarter” and “was the big driver to the negative comp.” They noted that “average ticket began to decline, albeit moderately, in mid-quarter.”
Having cut planned new stores for 2009 early to a target of 20 to 25 stores, they are “now reducing that number to approximately 15 new stores,” of which nine are relocations and upgrades.
Riggio said they were experiencing the “same type of decline reported by other major retailers” and cited in particular the “lack of coverage of books, both in the mainstream media and on talk-radio,” due to the presidential election and the economic crisis. Riggio told analysts not to expect extra discounts this holiday to drive sales. “We don’t believe that more aggressive discounting is profitable. We can drive traffic, but we don’t think we can drive traffic profitably” that way.
Yesterday’s trading had already sent shares down another 7.75 percent in advance of today’s news, hitting
an all-time low–but the stock was down as much as 15 percent this morning before rebounding with the general market.