Monday, August 27, 2012

MediaWeek (V5, N35) Retail Bookstore Results: BN, Smiths, BAM, Dymocks (Aust) Strategy + More

Barnes And Noble reported their first quarter results which were mixed (Press Release)
First quarter consolidated revenues increased 2.5% to $1.5 billion as compared to the prior year. First quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) was $4 million as compared to a loss of $24 million a year ago. The consolidated first quarter net loss declined 28% as compared to the prior year to $41.0 million, or $0.78 per share.

Digital Content Sales Increase 46%
Bookstore Comparable Sales Increase 4.6%
Retail EBITDA Increases 88% to $75 million

“During the first quarter, we continued to see improvement in both our rapidly growing NOOK business, which saw digital content sales increase 46% during the quarter, and at our bookstores, which continue to benefit from market consolidation and strong sales of the Fifty Shades series,” said William Lynch, Chief Executive Officer of Barnes & Noble. “The growth in comps at retail and the continued strong growth of our digital content business, as well as increased cost management focus, were drivers in the business turning from an EBITDA loss last year to slightly positive EBITDA in the first quarter of this year. As announced yesterday, we are excited to expand our award winning NOOK digital bookstore and devices beyond the U.S. market and to work with U.K. retailers to bring millions of U.K. customers the best experience in digital reading.”


The Retail segment, which consists of the Barnes & Noble bookstores and businesses, had revenues of $1.1 billion for the quarter, increasing 2% over the prior year. Comparable bookstore sales increased 4.6% for the quarter, as compared to the prior year period. Comparable bookstore sales continued to benefit from the liquidation of Borders’ bookstores in fiscal 2012 and strong sales of the Fifty Shades of Grey series. Core comparable bookstore sales, which exclude sales of NOOK products, increased 7.6% for the quarter. sales continued to decline for the quarter.

Retail earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $40 million to $75 million during the first quarter, an 88% increase, driven by comparable sales increases, a higher mix of higher margin core products and increased store productivity.


The College segment, which consists of the Barnes & Noble College bookstores business, had revenues of $221 million during this non-back-to-school rush period. Comparable College store sales decreased 2.0% for the quarter, as compared to the prior year period. 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.
College EBITDA losses increased by $2 million during the quarter from a loss of $12 million a year ago to a loss of $14 million, driven by new store expenses and investments in digital education.


The NOOK segment, which consists of the company’s digital business (including Readers, digital content and accessories), had revenues of $192 million for the quarter, essentially flat as compared to last year. Digital content sales increased 46% for the first quarter. Digital content sales are defined to include digital books, digital newsstand, and the apps business. Device sales declined for the quarter due to lower average selling prices and production scaling issues surrounding the popular newly launched GlowLight product resulting in unmet demand.

NOOK EBITDA losses increased by $6 million, from a loss of $51 million to a loss of $57 million, as a result of product markdowns on the recently announced NOOK price adjustments, as well as continued investments in the NOOK business.

Newco Formation

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 Microsoft transaction. The company expects the Microsoft transaction to close this Fall.


BusinessWeek: Barnes & Noble Investor Elation With Microsoft Deal Fades
Publishers' Weekly: Content Drives Improvement at Barnes & Noble
Things seem to be going well for UK retailer WH Smiths which in advance of their full year results they announced they would perform at the top end of analyst expectations: Press Release:
WH Smith PLC will announce preliminary results for the year ending 31 August 2012 on Thursday 11 October 2012. Prior to its close period, the Company today issues the following pre close update.

The Travel business continues its good performance despite the current economic climate and its UK store opening programme remains on track. We continue to manage costs tightly and have delivered strong gross margin gains driven by good mix management. Travel continues to make good progress in winning new business in its international channel.

In the High Street business our focus on gross margin and tight cost control continues to deliver a good performance. In addition, High Street has seen an improvement in the sales trend of books following the recent positive publishing schedule.

WH Smith PLC expects the outcome for the year to 31 August 2012 to be at the top end of market expectations.  Both businesses remain highly cash generative.

Guardian: WH Smith shares hit all-time high as retailer expects good profits
Telegraph; Questor share tip: Update leaves WH Smith looking anything but grey
Books A Million announce their second quarter results (Press Release)
Books-A-Million, Inc. (NASDAQ:BAMM) today announced financial results for the 13-week and 26-week periods ended July 28, 2012. Net sales for the 13-week period ended July 28, 2012 increased 14.9% to $120.4 million compared with sales of $104.8 million in the year-earlier period. Comparable store sales for the second quarter increased 0.5%, compared with the 13-week period in the prior year. Net loss from continuing operations for the second quarter was $0.9 million, or $0.06 per diluted share, compared with net loss from continuing operations of $2.9 million, or $0.18 per diluted share, in the year-earlier period.

For the 26-week period ended July 28, 2012, net sales increased 12.7% to $233.5 million from net sales of $207.2 million in the year-earlier period. Comparable store sales declined 1.8% compared with the same period in the prior year. For the 26-week period ended July 28, 2012, the Company reported net loss from continuing operations of $2.8 million, or $0.18 per diluted share, compared with net loss from continuing operations of $6.3 million, or $0.40 per diluted share, in the year-earlier period.

Commenting on the results, Terrance G. Finley, Chief Executive Officer and President, said, "Results for the quarter reflect the contribution from our new stores that opened in the 4th quarter, the phenomenal success of the Fifty Shades of Grey series, and continued solid performance in kids, teen and general merchandise. Our team remains focused on diversifying our store assortments and adjusting our store layouts to support our core business and new categories as we prepare for the upcoming holiday season.”

The Company also announced today that the Company’s Board of Directors has authorized a program to repurchase up to $5 million in shares of its common stock. Stock may be purchased on the open market or through private transactions from time to time through March 31, 2014, dependent upon market conditions. The plan does not obligate the Company to repurchase any specific number of shares and may be suspended at any time at management’s discretion. The Company currently has 16.0 million shares of common stock outstanding.

Publishers' Weekly:: New Stores Boost Books-A-Million
Interesting write-up on the state of the Australian retail book market with a focus on Dymocks the largely franchise operator of bookstores (Sydney Telegraph)
Dymocks managing director Steven Cox said Dymocks had benefited from the Borders and A&R collapse. Stores that were competing, in many cases, against a Borders and an Angus & Robertson store became the only specialist seller in the shopping centre. "We have gone from an over-supply in the Australian market to having gaps in the market and locations with no bookstore," Mr Cox said. "We have a real opportunity to connect with more customers."

Dymocks opened eight new stores last year and a new store at Charlestown this year, with one at Wollongong soon to open and several more in the offing, including one at Hornsby, which was left without a specialist bookstore after Borders closed. He is less concerned about Amazon. "We've competed with Amazon for many years and we spend a lot of time connecting with our customers," Mr Cox said.

"The challenge people have is finding something of quality. We have really knowledgeable staff, our stores are locally owned and operated, and we help people find great books. "Readers want to have confidence they are buying a great book and our strength is in that. Amazon can't compete with our level of service."

On price, Mr Cox insists that without changes to the import laws, bookstores will struggle to compete with online retailers. His stance pitches him against publishers, who won a battle in 2009 when the federal Labor government rejected parallel import laws.

Australian publishers have the exclusive right to publish books written by overseas authors. So if a major American or British author brings out a book, booksellers such as Dymocks must wait until the local publisher prints it, which in some cases can be months after the overseas release. For the publisher, it means they can effectively subsidize Australian authors through the sales of big-name overseas authors and profit from the biggest releases.
Borders (Australia) Online name to disappear (The Bookseller):
The Borders name will soon be retired as the Pearson Group looks to rebrand the remaining online store under their Bookworld banner.

Despite Borders stores disappearing from the UK and USA, the name had continued in Australia as an online e-book store, but will soon be replaced, according to reports in The Australian.

James Webber, the chief executive of Bookworld, a division of the Pearson Group, told the newspaper: “We just believe the Borders brand has had its day. There are no stores left and globally it’s been in demise so we believe there’s an opportunity to revitalize (the franchise).”
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