Sales at Barnes & Noble Education rose 15.1% in the second quarter ended October 28, over the comparable period last year.
The increase was owed entirely to two acquisitions the company made in the calendar year—the purchases of wholesaler MBS Textbook Exchange in February, and the writing improvement service Student Brands in August. MBS in particular made a significant contribution to B&NE, adding $134.8 million to revenue in the quarter. Total B&NE sales were $886.9 million in the quarter, while net earnings jumped 65% to $48.4 million.
The acquisitions offset weakness in some of B&NE’s traditional businesses. Sales of textbooks fell 5.0% in the quarter, compared to last year, which B&NE attributed to lower enrollments at two-year colleges and students purchasing lower priced digital products. As a result, comparable store sales fell 4.4% in the quarter.
CEO Mike Huseby acknowledged that the changes taking place in the higher education market are forcing all companies that operate there to change business models. It's something, he said, that B&NE is in the midst of doing.
In his remarks to analysts, Husbey said the shift to digital products (and other less costly formats) accelerated in the quarter. To that end, textbooks comprised a smaller percentage of student purchases. This, Huseby noted, is a trend B&NE expects to continue. Revenue in the quarter was also negatively affected by a drop in the average sale price of products offered by publishers.
Despite the challenges, Huseby insisted B&NE is well positioned to take advantage of the changing business environment. B&NE’s strategy, Huseby explained, is to pivot from "a traditional bookstore management model to a leading aggregator and distributor of both physical and digital educational." He added that it's important the company be able to distribute that content "within and, importantly, also outside of, the footprint of managed stores that we have.”
As the company works to adapt to the new market conditions, B&NE expects sales at its college store division to be relatively flat in fiscal 2018—which ends in April—while comparable store sales are projected to decline in the low-to mid-single digit percentage point range year over year. Total sales are forecast to be in the range of $2.25 billion to $2.35 billion before intercompany eliminations. Adjusted EBITDA is expected to be between $105 million to $120 million.