In what it hopes is the first step in a long-awaited turnaround, Barnes & Noble Education reported that EBITDA (earnings before interest, taxes, depreciation, and amortization) from continuing operations increased 28.3%, to $50.3 million, in the quarter ended October 31, 2023, over the comparable period in fiscal 2022. Total sales rose 0.3%, to $610 million. B&NE executives stressed that the improvement in profitability shows that the company's dual efforts to cut costs while switching its business model are paying off.

The operator of 1,271 physical and virtual college stores, B&NE has invested heavily in so-called First Day programs, in which students buy most all of their instructional materials on the first day of class, usually as part of a fee or as part of tuition. First Day sales rose 39%, in the quarter, to $199 million, compared to $143 million in the prior year period. In the quarter, 157 campus stores used B&NE’s proprietary First Day Complete (FDC) service, which generated $136 million of all First Day total sales of $199 million. The number of students using FDC jumped 47% over the fall of 2022.

The increase in First Day sales offset declines in trade books and general merchandise, resulting in flat retail sales of $599 million in the quarter, which is by far B&NE’s most important period each year. Executives pointed out that flat sales came despite the loss of 128 stores over the past year, as the company continues to close underperforming outlets.

The switch in business models away from traditional a la carte models also allowed B&NE to reduce selling and administrative expenses in its retail segment by 14.3%, resulting in second quarter adjusted EBITDA of $48.3 million, up from $39.4 million in the prior year period. The retail segment accounted for all but $21 million in second quarter sales, with the remainder coming from its wholesale business.

Executives said that they expect to add more stores to B&NE's First Day initiatives while simultaneously continuing to reduce expenses. The company predicted that it will report $40 million in EBITDA for fiscal 2024.