B&N Remains Cautious for Holidays

In a conference call discussing current business trends as well as the impact on B&N Inc. of acquiring Barnes & Noble College Booksellers, CFO Joseph Lombardi said that while the college division's sales were “a little short” of what was expected, the unit was still making its earnings numbers. Comp-store sales were down 0.7% for the nine-week period ended October 3, and Lombardi noted that the college unit, while better protected than the retail operation from recession, was not immune to the economic downturn. On the retail side, Lombardi said B&N expects comp sales to improve through the rest of October after falling 4.1% in the August 2—October 3, period mainly because comp sales fell by double digits in the comparable period a year ago. Lombardi declined to forecast holiday sales, noting that while B&N is excited about the books available, the retailer is remaining cautious, “preparing for what may or may not happen” in the economy and consumers' response to it.

Most of the presentation dealt with explaining the cyclical nature of the college bookstore business, in which the college division generates 78% of its sales and all of its profits in the August—January period (the second and third quarters). In the current second quarter, Lombardi said, sales of new textbooks were up in mid-single digits, while there was a slight decline in used textbook sales and a more significant decline in the sale of general merchandise, which he attributed to the impact of the recession.

College sales for the full year ending May 1, 2010, are projected to be about $1.8 billion, a slight increase over fiscal 2009. In the retail business, full-year comp sales are expected to be down 2% to 4% as comparisons to the prior year continue to become easier. Lombardi reiterated that B&N Inc. won't receive the full earnings benefits from the college purchase until 2011 since part of the back-to-school rush period occurred before the deal closed, plus one-time expenses associated with the purchase.

The “New” Barnes & Noble ($ in millions)*

B&N College Sales Mix