Book sales at Barnes&Noble.com totaled $188 million in 1999, a 211% increase over book sales of $60.5 million in 1998, the company reported in its 10-k filing with the SEC. Book sales represented 93% of B&N.com's total revenues of $202.5 million last year and accounted for 98% of revenues in 1998. The company said that as it continues to roll out new online stores, such as its video and DVD store, books will account for a smaller percentage of total revenues. International sales doubled in the year to just more than $12 million.
The launch of its music store last year as well as increasing the discount of New York Times bestsellers from 40% to 50% resulted in a decline in B&N.com's gross margin to 21.0% from 23.1% in 1998. The company spent $111.5 million on marketing and sales last year, an increase of 58% compared with 1998, although marketing and sales expenditures accounted for only 55% of revenues last year compared with 114% in 1998.
While B&N.com is working to lower the costs of customer acquisition in 2000, it expects fulfillment costs to increase as a result of the additional fixed costs associated with the opening of two new distribution centers in the year. The company anticipates that capital expenditure associated with the opening of its Memphis warehouse in this year's second quarter will total $5 million in 2000, and costs related to opening the Reno facility some time within the next 12 months will be $20 million.
During the first quarter of 2000, B&N.com acquired a 32% stake in Enews.com for $26.4 million in cash plus $12.8 million in stock. As part of the agreement, Enews.com became the exclusive seller of magazines on B&N.com's Web site, offering subscriptions to approximately 1,000 publications. In February, B&N.com launched bnRadio, an Internet radio service that allows customers to listen to more than 25,000 full-length songs and three- to five-minute selections from audiobooks, all of which can be acquired through the site.
The filing also noted that last month the company paid its former CEO Jonathan Bulkeley nearly $11 million for the surrender of one million stock options. Bulkeley resigned from B&N.com in January (News, Jan. 17) and a new CEO has not yet been found. Steve Riggio, vice-chairman of B&N.com, has been serving as acting CEO; a spokesperson said a new CEO may be in place by the end of May. As of February 29, 2000, the company had 1,237 full-time and part-time employees, compared to 423 on September 1, 1998.
