We had a brief item about Barnes & Noble’s disastrous earnings report yesterday. Here’s one with more analysis
From The Wall Street Journal:
Losses ballooned at Barnes & Noble Inc.’s Nook digital business in the latest quarter, the clearest signal yet that it is falling behind larger technology companies such as Amazon.com Inc. and Apple Inc. in the tablet wars.
Nook revenue plunged 26% to $316 million for the fiscal third quarter ended Jan. 26. The Nook segment, which includes e-readers, tablets and e-books, posted a loss of $190 million, measured before interest, taxes, depreciation and amortization, compared with a loss on the same basis of $83 million a year earlier. As a result, Barnes & Noble itself posted a small net loss, despite improved profits from its retail stores business.
“This is in the worse-than-we-thought category,” said James McQuivey, an analyst with Forrester Research Inc. “What went wrong is that Apple’s iPad Mini went right. Barnes & Noble’s business depends on selling the devices in the Christmas quarter to drive content sales all year round.
. . . .
Speaking on a conference call with analysts Thursday, Mr. Lynch said, “We are committed to the tablet and e-reader market, but we have to address some of the perceived consumer shortfalls in our ecosystem. We aren’t going to continue doing what we’re doing. We’re going to adjust quickly. ”
He gave few details, other than disclosing cost-cutting efforts and plans to enter into more partnerships so that the chain can build its e-book business—even without growth in device sales.
. . . .
Mr. McQuivey suggested that Barnes & Noble will now to have to bolster efforts to inform consumers that they can access Nook content on most other major devices, including the new iPad Mini. Barnes & Noble “can’t sell devices fast enough to sustain that business, so they need to take advantage of other company’s devices by winning customers for content purchases,” he said.
. . . .
In the quarter, revenue at Barnes & Noble’s consumer stores fell 10.3% to $1.5 billion, with sales at stores open at least a year, a key indicator known as same-store sales, down 7.3%. Excluding sales of Nook products, core same-store sales were down 2.2%.
Link to the rest at The Wall Street Journal (Link may expire)
It’s a tough job competing with tech companies in a growing market like tablets. And it’s an enormously different business than running a bunch of bookstores.
Nook has been trying to compete with Apple, Google, Samsung, Amazon and a growing list of other tech companies. To be fair to Barnes & Noble, it didn’t start out that way. Initially, the Nook was supposed to live in a proprietary world of dedicated ereaders and allow Barnes & Noble’s book customers to read ebooks they purchased from Barnes & Noble.
But ebooks would change the book world in ways Barnes & Noble did not envision.
The key competitive advantage of the Nook was its association with Barnes & Noble. When the Nook was released in October, 2009, Barnes & Noble was a dominating force in the book business, growing, fighting it out with Borders, destroying smaller chains.
The world has changed in the last three-plus years. Borders is gone. Barnes & Noble is shrinking and morphing into a gift shop as the physical book business declines. Consumers are becoming smarter (as they always do) and realize that there is nothing special about ebooks they purchase from Barnes & Noble that they can’t get by purchasing them anywhere else.