Barnes & Noble loss doubles on weak Nook
NeW yORK • Sales plummeted at Barnes & Noble Inc. bookstores in the latest quarter and its Nook ebook devices failed to keep up with competitors, pushing the company to a net loss that more than doubled from a year ago.
The largest traditional u.S. bookseller said Tuesday it will stop making its own Nook colour touchscreen tablets as a result, a move intended to stem the losses it has suffered from its digital unit.
It said it will continue to make its more basic, black-and-white e-readers, but farm out the tablet manufacturing to a third party.
“We know this is a sizable change from our existing strategy,” CeO William Lynch said in a call with analysts. As for how the tablet partnership will work, he declined to give specifics and said the company is currently in discussions with “a lot of interested parties.”
The about-face troubled investors, who sent Barnes & Noble’s stock price down more than 15% to uS$15.88.
Barnes & Noble had been pouring money into developing its Nook devices to keep up with changing reading habits and beat back competition from retailers such as Amazon, which makes the popular Kindle readers.
It hasn’t worked. According to research firm IdC, Barnes & Noble’s tablet shipments fell to one million in the fourth quarter, down from 1.4 million a year earlier. At the same time, sales of Kindle e-readers have kept growing.
Michael Norris, senior analyst in the trade books group at Simba Information, said Barnes & Noble didn’t differentiate its product aggressively enough.
Whether the change will help Barnes & Noble remains to be seen, but Mr. Norris warned that it could be going down a dangerous path.
“That’s where Borders got it so wrong,” he said. “They had a bunch of devices lined up like Formula One race cars. you’d ask an associate about it, and they wouldn’t have a clue about them.”
There had been signs that Barnes & Noble was seeking to exit the hardware business to develop software and content for other companies’ tablets and smartphones. This month, the company slashed prices on its Nook readers, leading some to suggest that it’s looking to clear out its stock of tablets.
On Tuesday, the company said it planned to sell its remaining inventory at the reduced prices. Some have speculated that Microsoft, which has a 6.8% stake in the Nook unit, could offer to buy it outright.
Meanwhile, its bookstores also saw sales decline. Revenue at stores open at least a year, a key metric, fell 8.8% during the period. For the Februaryto-April quarter, Barnes & Noble said its net loss totalled uS$118.6-million, or uS$2.11 per share. That compares with a loss of uS$56.9-million (uS$1.06) last year.
Revenue fell 7% to uS$1.28-billion. Analysts expected a loss of 97¢ per share on revenue of uS$1.33-billion.