Barnes & Noble's Earnings Less Than Page-Turning

Amazon.com may be doing its darnedest to kick Barnes & Noble to the curb, but the bookseller is not out of the fight just yet. B&N announced its fiscal 2013 second-quarter earnings yesterday morning, and while it is a far cry from the highs of 2006, the report still had some bright spots. Somehow, this company still manages to keep hanging on. Is this a shrewd business strategy, or the slow, painful death of a giant?

B&N University
Barnes & Noble still puts faith in the ever-increasing price of university textbooks and merchandise. Its overall retail may be suffering, dropping 3% compared to 2011, but revenues for its college branch increased by 0.4% compared to the previous year. Comparable college store sales, on the other hand, were down by 0.5% this quarter, and EBITDA for the college branch sank 5% to $88 million. B&N's release associates the lower EBITDA results with a rise in textbook rentals, which require the company to defer a higher amount of revenue. Still, this branch's positive overall earnings are a rare bright spot on the bookseller's financial statement.

Nooks and crannies
It's no surprise that Nook is the magic word for Barnes & Noble. This quarter, revenues for the e-reader rose to $160 million, a 6% jump from the previous year. Additionally, Black Friday was a lucky one for B&N, with unit sales for the Nook doubling compared to the same weekend last year. Not a bad way to close a quarter, and with the release of two new products (the Nook HD and HD+), the e-reader's next quarter could look even better.


On top of the Nook's holiday success, Barnes & Noble's sales for digital content (including digital newsstand items, books, and apps) were also up compared to last year's second quarter. This branch of B&N is small, but appears financially mighty.

The bad news
Barnes & Noble's net profit margin has edged toward the negative since 2009. On a quarterly basis, April 2012's net profit margin was -4%, and by October it had risen meekly to 0.1%.

The book retailer could be on to something with its Nook and digital content, but the future likely won't be a bright one if it continues to have negative income. B&N may have had a great Black Friday, but in order to survive, it needs to concoct a model for staying relevant every other day of the year.

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The article Barnes & Noble's Earnings Less Than Page-Turning originally appeared on Fool.com.

Caroline Bennett has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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