Led primarily by a reduction in losses in its Nook division, Barnes & Noble reported operating income of $54.3 million in the fiscal year ended April 29, up from $14.6 million in fiscal 2016. The decline in losses at the Nook division (which now has 92 employees; at one point it had about 750) as well as other cost savings offset a 6.5% drop in total sales, which fell to $3.89 billion in fiscal 2017. In hosting his first conference call with analysts to review B&N’s financial performance, Demos Parneros—who took over as CEO in late April—said that, while the company was able to improve its bottom line through cost savings, executives know they need to find ways to grow revenue.
Parneros said B&N will continue to try out different concepts and floor layouts in its three new test stores as it works to “reimagine our store of the future.” Among top priorities are using space more productively by downsizing sections where sales are softening, such as the Nook and music DVD areas, and growing categories that are doing better, such as children’s books. Getting the inventory puzzle right will be key to drawing in more people and getting customers to spend more once they are at the stores, he said. Parneros said he doesn’t expect B&N to find “a breakthrough category” that will solve the retailer’s revenue problems, but does expect to find the segments that appeal the most to its customer base.
Along with changing up its inventory, B&N believes it can increase the conversion rate of customers by improving navigation and discovery throughout the store, including a customer-friendly and more intuitive organization of books and improved signage for easier browsing within and across sections.
Despite its focus on driving up sales, no immediate turnaround is expected. The company forecasts that comparable store sales, which fell 6.3% in fiscal 2017, will fall in the low single digits in fiscal 2018. B&N expects comps to be soft in the first half of the year before improving in the second part of fiscal 2018. The chain will also have a net decline in its number of outlets in fiscal 2018—it expects to open about three new stores and close 10, which would give it 626 stores at the end of fiscal 2018. Parneros said the goal for fiscal 2018 is to “maintain our current level of profitability while planting the seeds for future growth.”
The sales decline in fiscal 2017 came from both the core retail segment and the Nook division, where sales of devices dropped 35% and digital content revenue declined 18%. At the stores, comparable sales for books fell 6%, due in part to lower sales of trade, bargain (especially adult coloring books), and juvenile titles. Comp store sales in nonbook core categories fell 5.1%; there were declines in the DVD, café, newsstand, and gift businesses.
Sales through BN.com, which benefited from the Apple e-book settlement that allowed customers to redeem credits at different e-book retailers, rose 3.9%. Both BN.com, which is having its desktop and mobile sites redesigned, and Nook remain important assets for B&N, Parneros said; the retailer remains committed to allowing customers to shop at its stores, online, and through their mobile devices.
Barnes & Noble inc. Segment Results, Fiscal 2016–2017
($ in millions)
|Segment||Apr. 30, 2016||Apr. 29, 2017||Change|
B&N Sales by Product Line
* includes tangible books, music, movies, rentals, and newsstand
** includes Nook, related accessories, e-content and warranties
*** includes toys and games, café products, gifts, and miscellaneous