Sales at Barnes & Noble fell 6.6% in the quarter ended July 30, compared to the same period last year. Revenue fell 6.1% in the company’s retail sector, and Nook revenue fell 24.5%.
As a result of the lower-than-expected sales, B&N reported a net loss from continuing operations of $14.4 million in the period, its first quarter of 2017, compared to $7.8 million in the first period of fiscal 2016.
The earnings release was the first financial disclosure since B&N fired CEO Ron Boire in August. The company attributed the decline in retail sales to "lower traffic and the challenging retail environment." Of particular concern was the 6.0% decline in comparable store sales in the quarter. Excluding Nook, comp sales were down 5.2% with lower book sales the main factor in dropping sales. B&N officials cited a leveling off of adult coloring book sales and a weaker lineup of books compared to 2015 as the main reason for the sales drop.
Total revenue in the retail segment was $881.7 million in the most recent quarter, down from $939 million a year ago. The weak top line for the retail segment led to an operating loss of $7.4 million for the stores and BN. com, compared to operating profit of $20.5 million in the first quarter of fiscal 2016.
The 24.5% drop in Nook sales lowered revenue in the quarter to $41.0 million, from $54.3 million a year ago. B&N managed to cut the loss in the division to $14.0 million, down from $26.2 million a year ago.
The disappointing sales figure caused B&N to lower its projections for comp store sales for the full fiscal year. The chain now projects that comp sales will decline in the low single digits. EBITDA, however, is still expected to be in the $200 million to $250 million range.
Boire Bounced Because of Inventory?
The conference call with analysts was led by chairman Len Riggio who has returned as CEO following the ouster of Boire. In Riggio and other executive remarks a reason for the surprised dismissal of Biore surfaced--a lack of inventory in B&N stores.
B&N returned a "significant amount of inventory" in the quarter, CFO Allan Lindstrom said, and then added that the inventory situation was being addressed on a store-by-store basis. Riggio said he was all for controlling inventory but observed that the last place you want to reduce inventory "is on store shelves." To separate itself from other bookstores, B&N needs to continue to offer a wide selection of books, Riggio said. He noted that the next B&N CEO will have a better understanding of the complexities of book retailing.