Barnes & Noble Swing into Q3 Loss but Shares Gain (BKS)

NYSE: BKS) shocked the Street on Thursday after it reported to have swung into fiscal third-quarter loss as its bottom line was dented by an inventory charge, higher sales and marketing expenses at its Nook Business and sales decline across all segments.

Barnes & Noble’s Nook business, which includes tablets, e-books and e-readers, has seen its top line reel under pressure as higher promotional allowances in the backdrop of ever-increasing competition is impacting margins.

Just few days ago, the Company warned that its losses for the current fiscal ending April will be wider-than-expected even as it slashed its revenue guidance.

For the fiscal third quarter ended Jan. 26, Barnes & Noble reported a loss of $6.1 million or 18 cents a share compared to a profit of $52 million or 71 cents a share, in the year earlier quarter.

Revenue during the period contracted 8.8% to $2.22 billion.

Analysts polled by Thomson Reuters had most recently forecasted earnings of 54 cents on revenue of $2.4 billion.

Gross margin shrunk to 24.7% from 26.8%, in the same period of last year.

Among Company’s different income streams, revenue from Nook business plunged 26% to $316 million as sales volumes of Nook devices fell. The company recorded $21 million linked to inventory charges, along with $15 million against promotional allowances in its Nook business.

Revenue from retail business fell 10% to $1.51 billion. Revenue in this segment was hurt due to poor online sales, a 7.3% decline in same-store-sales and store closures.

Back in January, B&N’s retail Group’s Chief Executive, Mitchell Klipper said that he the Company was likely to close down nearly third of its retail stores in the span of next 10 years. Earlier this week, Barnes & Noble group Chairman and largest shareholder, Leonard Riggio said that he intends to take retail business private in order to enhance shareholder value.

Although profitable, Barnes & Noble’s print-book business is feeling the pinch in the backdrop of readers’ increasing penchant for touch phones, tablets, and dedicated e-readers, which lets them tp download e-contents even as intensifying competition from e-commerce giant, Amazon.com Inc has also put the pressure on top line.

On the brighter side, the digital content sales through the Nook unit climbed 6.8%. However, in college business, sales slipped 1.6% at $517.2 million

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.