B&N’s retail bookstore results from 2Q2015 were unexciting, but hardly terminal. “Retail sales, which include Barnes & Noble stores and BN.com, were $861 million, decreasing 3.1% due to lower online sales, store closures and a 1% comparable store sales decrease,” B&N’s announcement stated. “Excluding NOOK products, comparable store sales decreased 0.5% for the quarter.” Following these results, TheStreet even retains a “Hold” rating on B&N’s stock, citing B&N’s supplementary statement that “through Black Friday weekend, third quarter comparable store sales excluding NOOK products increased 1.1%.”
It’s the Nook division that is really bleeding red. “NOOK sales of $43.5 million decreased 31.9% due primarily to lower content sales,” noted the announcement. “NOOK EBITDA losses of $21.3 million declined $15.1 million versus the prior year as the company continues to reduce expenses.”
And yes, that suggests that B&N’s ebook sales, rather than its devices, are the problem, but the latest Nook entry in the e-reader stakes, the Nook Glowlight Plus, hasn’t exactly … ahem … set the world on Fire. That device in itself elicited a number of gloomy prognostications of B&N’s imminent exit from the e-reader business. It’s hard to argue that the dynamics have changed much since then. Amazon is busily trumpeting how many $50 Fires it’s sold, giving the new e-book reader a no-brainer choice of vendor. With its well-publicized restrictions on access to outside e-book sources, who would want to commit to the Nook ecosystem now?
B&N, meanwhile, may have a less dire future than many Cassandras believe. Seeking Alpha is busily arguing off the back of the latest results that its problems are “self-inflicted,” and that “the U.S. printed book market is flattening out and is likely to begin growing again.” And Waterstones’ performance in the UK, notwithstanding the anti-ebook snark loaded onto it, does show that a printed book retail turnaround is possible, even in today’s market.
So is it really time, this time, to kiss the Nook goodbye? Even a year ago, with the last Nook-spinoff-that-wasn’t, Bloomberg was claiming that: “essentially ditching the Nook—an expensive digital strategy that appears not to have worked, given the competitive landscape—could make the bookseller’s core retail operation more attractive to a buyer.” And whatever everyone thinks of the Nook platform right now, it’s unlikely that a new owner could do worse with it after a spinoff than B&N is doing already. If I was an activist investor in B&N stock, I’d be pressing for all this to happen. Revised expectations after ditching the Nook deadweight, and a potential acquisition premium or bidding war? All meat and drink to an activist.