Barnes and Noble Sticking With Nook Despite Plummeting Sales

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Engadget The Nook
(Engadget)
Barnes and Noble (BKS) insisted this morning that it's sticking with its troubled Nook tablet despite falling sales that are hurting its bottom line.

The retailer reported its third-quarter sales figures today, and revenues fell 8.8% to $2.2 billion, below analysts' estimates of $2.4 billion; the company posted a net loss of $6.1 million for the quarter.

But the biggest story was the continuing free-fall of the bookseller's Nook division. Revenues for the e-reader business fell a whopping 26% for the quarter, which the Barnes & Noble attributed to falling device sales.

That comes as no great surprise. Poor sales have prompted rumors that Barnes and Noble is thinking of ditching the e-reader business. Meanwhile, company founder Leonard Riggio expressed interest in buying its retail business but spinning off the struggling Nook division.

The latest earnings report makes it easy to see why Riggio is more interested in the stores than the e-reader: As the Wall Street Journal points out, Ebitda (cash earnings) for the retail business were up over last year despite a decline in revenue.

For now, though, the company insists that it's not ready to abandon the Nook.

"In terms of the Nook Media business, we've taken significant actions to begin to right size our cost structure in the Nook segment, while also taking a large markdown on Nook devices in order to enhance our ability to achieve our estimated sales plans in subsequent quarters," said Barnes & Noble CEO William Lynch in the earnings release. The most recent attempt to boost sales came earlier this week, when Barnes and Noble offered $50 credit to spend on e-books to anyone buying a Nook HD+.

It's increasingly difficult to see a path to success for the Nook, which faces stiff competition in the tablet and e-reader markets from Amazon, Apple and Google. But publicly at least, the bookseller seems determined to try and make it work.

Still, the poor showing by Nook coupled with the solid store results gives credence to the idea that Riggio will buy the company and spin off the unprofitable Nook division -- which is probably why Barnes and Noble shares are soaring today despite the generally underwhelming earnings report.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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