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Barnes & Noble’s Fiscal 2012 Year-End Financial Results

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Barnes & Noble’s Fiscal 2012 Year-End Financial Results
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Barnes & Noble, Inc. just released their fourth quarter financial results for the full fiscal year of 2012 ending on April 28th. They also announced that the NOOK operating segment will now feature a separate earnings report and the formerly segmented BN.com results will be integrated into the retail reports.

Consolidated revenues for the company grew 0.4% to $1.4 billion year-over-year. Consolidated fourth quarter earnings before taxes and interest, depreciation and amortization (EBITDA) loss of $11.1 million. Sounds bad, but it’s an over 50% improvement over last year at the same time. Net loses are ip 3% from last year and came in at just under $58 million or $1.08 per share.

Fiscal 2012 consolidated revenues increased to $7.1 billion form last year, which is a 2% increase. Consolidated EBITDA also increased. They are up 5% over last year and came in at $171 million. Net loses improved 7% and are down to just under $70 million or $1.41 per share.

Fiscal 2012 includes pre-tax legal and settlement-related expenses of $20.7 million, and $14 million from litigation with Microsoft, which has been settled.

Effective tax rate for the company is 27% for the quarter and 29% for the full year. The tax rate was effected by a $5.9 million compensation-related permanent tax difference charge related to past earning periods, which ended up being charged to the current period. It had an overall $0.10 per share impact.

Here’s the individual segments breakdown from their earnings report:

Retail:

As a result of the change in segment reporting, the Retail segment now includes results from the Barnes & Noble bookstores and BN.com. Retail sales were $1.1 billion for the quarter and $4.9 billion for the full year, increasing 0.5% for the quarter while decreasing 1.5% for the fiscal year. Comparable bookstore sales increased 4.5% for the quarter and 1.4% for the full year, as compared to the prior year periods. Comparable bookstore sales benefited from the liquidation of Borders’ bookstores during fiscal 2012, increased sales of NOOK products, and a strong title lineup including The Hunger Games and Fifty Shades of Grey trilogies. Core comparable bookstore sales, which exclude sales of NOOK products, increased 6.9% for the quarter and 0.7% for the full year. BN.com sales continued to decline for the quarter as well as the fiscal year.

College:

The College segment, which includes results from the Barnes & Noble College bookstores, had revenues of $228 million for the quarter and $1.7 billion for the full year, increasing 5.7% for the quarter and decreasing 1.9% for the year, as compared to the prior year. As compared to the year ago period, fourth quarter sales were positively impacted by the recognition of textbook rental sales deferred from the third quarter. However, full year sales were lower as compared to a year ago, due to a shift from selling new and used textbooks to lower priced textbook rentals. Comparable College store sales decreased 2.2% for the quarter and 0.3% for the full year, as compared to the prior year periods. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period.

NOOK:

The NOOK segment, which consists of the company’s digital business (including Readers, digital content and accessories), had revenues of $164 million for the quarter and $933 million for the full year. NOOK segment comparable sales increased 1% for the fourth quarter while increasing 45% for the full year, as compared to the prior year periods. Device sales declined during the fourth quarter due to higher third-party channel partner returns, lower selling volume and lower average selling prices. In order to optimize the supply chain for new products, the company took back NOOK Simple Touch inventory following the previously announced holiday sales shortfall. Digital content sales increased 65% for the fourth quarter and 119% for the full year on a comparable basis, growing comparable digital content sales to $483 million for the full year. Digital content sales are defined to include digital books, digital newsstand, and the apps business.
Comparable NOOK sales reflect the actual selling price for digital books sold under the agency model rather than solely the commission received. Additionally, such sales include all deferred NOOK device revenues, and device sales to third-party channel partners on a “sell-in” basis net of estimated returns.

Newco Separation:

On April 30th, the company announced that it has formed a strategic partnership with Microsoft to form a new subsidiary, Newco, which is comprised of the company’s NOOK digital and College businesses. The company continues to be actively engaged in the formation of Newco and is in the process of implementing the work necessary to complete the separation and close the Microsoft transaction.

William Lynch, Chief Executive Officer of Barnes & Noble, comments on the final results of the quarter:

“We grew our business in 2012 while continuing to make the necessary investments for the future of the business,”

“In digital, our NOOK content sales continued to explode with 119% year-on year growth. In the quarter we also announced a historic new partnership with Microsoft that will include a significant investment in Newco, and that will capitalize the company to fuel continued growth in digital and international expansion.”

“Lastly, we announced NOOK Simple Touch with GlowLight, that we started shipping in the first quarter of fiscal 2013, which has quickly become the highest rated eReader in the market.”

“At retail, we had a terrific year growing comparable bookstore sales 4.5% for the quarter and 1.4% for the year, a result of our effective new merchandising efforts and continued industry consolidation. As we look out to fiscal 2013, we feel the company is strategically well positioned to grow value for shareholders.”

Barnes & Noble’s Fiscal 2012 Year-End Financial Results
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