B&N looks to reduce Nook losses

B&N looks to reduce Nook losses

Barnes & Noble has announced it will partner with a third party to manufacture tablet devices after reporting a fall in sales in its Nook division of nearly 17% year-on-year.

The American bookseller today (25th June) revealed sales in its digital business plummeted 34% in the fourth quarter to 27th April 2013, compared with the fourth quarter a year ago, while its annual digital sales sank by 16.8%.

As a result, the company will continue to develop its Simple Touch and Glowlight e-readers in-house but will develop Nook tablet lines as co-branded products with an as yet un-named third party in a bid to cut  losses.

B&N said: “The company plans to significantly reduce losses in the Nook segment by limiting risks associated with manufacturing. Going forward, the company intends to continue to design e-reading devices and reading platforms, while creating a partnership model for manufacturing in the competitive colour tablet market . . . At the same time, the company intends to continue to build its digital catalogue, adding thousands of e-books every week, and launching new Nook apps.”

While device sales dropped, annual digital content sales at B&N increased by 16.2% year-on-year. However, digital content sales for the fourth quarter decreased 8.9% in comparison to the fourth quarter in 2012, which the company blamed on lower device sales and the success last year of the Hunger Games and Fifty Shades of Grey trilogies.

William Lynch, chief executive officer of Barnes & Noble, said the company was taking “big steps” to cut losses in the Nook business. He said: “Our retail and college businesses delivered strong financial performances in fiscal year 2013. We are taking big steps to reduce the losses in the Nook segment, as we move to a partner-centric model in tablets and reduce overhead costs. 

"We plan to continue to innovate in the single purpose black-and-white e-reader category, and the underpinning of our strategy remains the same today as it has since we first entered the digital market, which is to offer customers any digital book, magazine or newspaper, on any device.”

Sales at B&N’s retail arm decreased 10% in the fourth quarter and by 5.9% (to $4.6bn) for the fiscal year, which the company attributed partly to store closures and lower online sales. As a result of the sales decline, Retail EBITDA [earnings before interest, taxes, depreciation and amortization] was down 23.9% for the fourth quarter to $51m, the company said.

The B&N College arm however increased revenues by 10.7% for the quarter and 1.1% for the year, to $1.8bn. The company said: “Fourth quarter sales were positively impacted by the back-to-school rush season, which extended into the fourth quarter.”

Overall, the company reported total revenues of $1.3bn for the fourth quarter, down 7.4%, while revenues for the whole year decreased 4.1% to £6.8bn. The total consolidated fourth quarter EBITDA loss was $122m, as compared to a loss of $9.7m a year earlier, whereas the consolidated fourth quarter net loss was $118.6m, as compared to the prior year net loss of $56.9m.