Barnes & Noble’s second quarter filing with the SEC was newsier than most, containing disclosures that it has closed its Tikatok operation and that it will continue to reduce its overall number of retail stores. B&N has made no secret of its plans to scale down the number of bricks-and-mortar retail outlets, and in the filing said that while it will open “a few retail stores in new geographic markets, the company expects to reduce the total number of retail stores.” A spokesperson said B&N will close about 15 stores by the end of the fiscal year in April. As of October 27, B&N had 689 trade stores.
Tikatok, an online platform geared to allow parents and children to write, illustrate, and publish their own books, was acquired in December 2009 for $2.3 million but never developed into an important business for B&N. The decision to close Tikatok resulted in an impairment charge of $1.9 million.
B&N also noted that it is facing fallout from the tampering with PIN pads earlier this fall. On October 24, B&N acknowledged that there had been tampering with PIN pad devices in 63 of its stores, all related to "one compromised PIN pad" in each location. B&N, which notified federal authorities of the stolen information, said the scheme was a "sophisticated criminal effort" to steal the credit card information of its customers, but that, ultimately, the theft affected fewer than 1% of its PIN pads.
In the quarterly filing, B&N said that after its public disclosure of the tampering, it was served with a complaint in one class action suit “and understands that three additional putative class actions also have been filed.” The complaints have been brought in federal district courts in the Northern Districts of California and Illinois and among the charges are negligence, breach of contract and invasion of privacy of customers who swiped credit and debit cards in B&N stores that had been hacked. B&N also acknowledged that it is possible that it could face additional litigation from the matter with suits possible from customers, banks, payment card companies or stockholders. Furthermore, B&N said it has received inquiries from the Federal Trade Commission and seven state attorneys general on the tampering and that B&N is cooperating with the various parties.