Barnes & Noble Inc.
09/07/2017

Barnes & Noble Reports Fiscal 2018 First Quarter Financial Results


First Quarter Operating Results Improve on Expense Reductions

NEW YORK--(BUSINESS WIRE)-- Barnes & Noble, Inc. (NYSE:BKS) today reported sales and earnings for its fiscal 2018 first quarter ended July 29, 2017.

Total sales for the first quarter were $853 million, declining 6.6% as compared to the prior year. Comparable store sales decreased 4.9%, as declines in non-book categories outpaced improved book trends during the quarter. The Company also experienced lower online and NOOK® sales during the quarter, which were impacted by the prior year eBook settlement and lower promotional activity.

The consolidated first quarter net loss improved to $10.8 million, or $0.15 per share, compared to a loss of $14.4 million, or $0.20 per share, in the prior year.

The consolidated first quarter operating loss of $15.2 million improved $6.2 million versus the prior year. Retail incurred an operating loss of $12.5 million, while NOOK incurred an operating loss of $2.7 million.

Consolidated first quarter EBITDA was $11.2 million, as compared to $9.6 million a year ago. NOOK generated EBITDA of $0.6 million, an $8.6 million improvement over the prior year on expense reductions. Retail EBITDA of $10.6 million decreased $7.0 million primarily due to the comparable store sales decline, somewhat mitigated by expense reductions.

"Our first quarter earnings results improved over the prior year, as we were able to mitigate the sales decline through expense reductions," said Demos Parneros, Chief Executive Officer of Barnes & Noble, Inc. "We expect to improve our performance in the back-half of the year, which coupled with our focus on expense reduction, will enable us to achieve EBITDA of $180 million."

Outlook

For fiscal year 2018, the Company continues to expect comparable bookstore sales to decline in the low single digits and full year consolidated EBITDA to be approximately $180 million.

Conference Call

A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, September 7, 2017, and is accessible at investors.barnesandnobleinc.com.

Barnes & Noble, Inc. will report fiscal 2018 second quarter results on or about November 30, 2017.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE: BKS) is the nation's largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 632 Barnes & Noble bookstores in 50 states, and one of the Web's premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a lineup of popular NOOK® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store®. The NOOK Store features more than 4.5 million digital books in the US (www.nook.com), plus periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS® and Windows®.

General information on Barnes & Noble, Inc. can be obtained by visiting the Company's corporate website at www.barnesandnobleinc.com.

BKS - Financial

Forward-Looking Statements

This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," "will," "forecasts," "projections," and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble's products, low growth or declining sales and net income due to various factors, including store closings, higher-than-anticipated or increasing costs, including with respect to store closings, relocation, occupancy (including in connection with lease renewals) and labor costs, the effects of competition, the risk of insufficient access to financing to implement future business initiatives, risks associated with data privacy and information security, risks associated with Barnes & Noble's supply chain, including possible delays and disruptions and increases in shipping rates, various risks associated with the digital business, including the possible loss of customers, declines in digital content sales, risks and costs associated with ongoing efforts to rationalize the digital business, the risk that financial and operational forecasts and projections are not achieved, the performance of Barnes & Noble's initiatives including but not limited to new store concepts and eCommerce initiatives, unanticipated adverse litigation results or effects, potential infringement of Barnes & Noble's intellectual property by third parties or by Barnes & Noble of the intellectual property of third parties, and other factors, including those factors discussed in detail in Item 1A, "Risk Factors," in Barnes & Noble's Annual Report on Form 10-K for the fiscal year ended April 29, 2017, and in Barnes & Noble's other filings made hereafter from time to time with the SEC.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this communication.

       
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
             
13 weeks ended 13 weeks ended
July 29, 2017   July 30, 2016
 
Sales $ 853,316 $ 913,882
Cost of sales and occupancy   599,835     636,343  
Gross profit   253,481     277,539  
Selling and administrative expenses 242,295 267,891
Depreciation and amortization   26,398     31,037  
Operating loss (15,212 ) (21,389 )
Interest expense, net   2,040     1,629  
Loss before taxes (17,252 ) (23,018 )
Income taxes   (6,474 )   (8,602 )
Net loss $ (10,778 ) $ (14,416 )
 
Loss per common share:
Basic $ (0.15 ) $ (0.20 )
Diluted $ (0.15 ) $ (0.20 )
 
Weighted average common shares outstanding:
Basic 72,453 72,903
Diluted 72,453 72,903
 
Dividends declared per common share $ 0.15 $ 0.15
 
Percentage of sales:
Sales 100.0 % 100.0 %
Cost of sales and occupancy   70.3 %   69.6 %
Gross profit   29.7 %   30.4 %
Selling and administrative expenses 28.4 % 29.3 %
Depreciation and amortization   3.1 %   3.4 %
Operating loss -1.8 % -2.3 %
Interest expense, net   0.2 %   0.2 %
Loss before taxes -2.0 % -2.5 %
Income taxes   -0.8 %   -0.9 %
Net loss -1.3 % -1.6 %
 

 
BARNES & NOBLE, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)
               
     
13 weeks ended 13 weeks ended
July 29, 2017   July 30, 2016
 
Sales  
Retail $ 830,036 $ 881,713
NOOK 29,500 41,048
Elimination   (6,220 )   (8,879 )
Total $ 853,316   $ 913,882  
 
Gross Profit
Retail $ 238,890 $ 258,287
NOOK   14,591     19,252  
Total $ 253,481   $ 277,539  
 
Selling and Administrative Expenses
Retail $ 228,321 $ 240,692
NOOK   13,974     27,199  
Total $ 242,295   $ 267,891  
 
EBITDA
Retail $ 10,569 $ 17,595
NOOK   617     (7,947 )
Total $ 11,186   $ 9,648  
 
Depreciation and Amortization
Retail $ (23,079 ) $ (24,962 )
NOOK   (3,319 )   (6,075 )
Total $ (26,398 ) $ (31,037 )
 
Operating Loss
Retail $ (12,510 ) $ (7,367 )
NOOK   (2,702 )   (14,022 )
Total $ (15,212 ) $ (21,389 )
 
Net Loss
Operating loss $ (15,212 ) $ (21,389 )
Interest expense, net (2,040 ) (1,629 )
Income taxes   6,474     8,602  
Total $ (10,778 ) $ (14,416 )
 
 
 
Percentage of sales:
 
Gross Margin
Retail 28.8 % 29.3 %
NOOK   62.7 %   59.8 %
Total 29.7 % 30.4 %
 
Selling and Administrative Expenses
Retail 27.5 % 27.3 %
NOOK   60.0 %   84.6 %
Total 28.4 % 29.3 %
 
EBITDA
Retail 1.3 % 2.0 %
NOOK   2.7 %   -24.7 %
Total 1.3 % 1.1 %
 
Depreciation and Amortization
Retail -2.8 % -2.8 %
NOOK   -14.3 %   -18.9 %
Total -3.1 % -3.4 %
 
Operating Loss
Retail -1.5 % -0.8 %
NOOK   -11.6 %   -43.6 %
Total -1.8 % -2.3 %
 

       
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
             
July 29, 2017 July 30, 2016
 
ASSETS
Current assets:
Cash and cash equivalents $ 11,978 $ 14,279
Receivables, net 64,016 102,289
Merchandise inventories, net 950,658 988,172
Prepaid expenses and other current assets   110,314     118,588  
Total current assets   1,136,966     1,223,328  
 
Property and equipment:
Land and land improvements 2,541 2,541
Buildings and leasehold improvements 1,069,981 1,052,576
Fixtures and equipment   1,625,127     1,578,172  
2,697,649 2,633,289
Less accumulated depreciation and amortization   2,427,178     2,343,382  
Net property and equipment   270,471     289,907  
 
Goodwill 207,381 211,276
Intangible assets, net 310,010 310,713
Other non-current assets   10,530     12,930  
Total assets $ 1,935,358   $ 2,048,154  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 511,226 $ 579,777
Accrued liabilities 265,400 307,374
Gift card liabilities   337,965     360,679  
Total current liabilities   1,114,591     1,247,830  
 
Long-term debt 84,100 64,600
Deferred taxes 83,785 54,290
Other long-term liabilities 97,099 111,341
 
Shareholders' equity:
Common stock; $0.001 par value; 300,000 shares authorized;
112,092 and 111,416 shares issued, respectively 112 112
Additional paid-in capital 1,744,013 1,740,843
Accumulated other comprehensive income 315 198
Retained earnings (67,131 ) (50,007 )
Treasury stock, at cost, 39,558 and 38,845 shares, respectively   (1,121,526 )   (1,121,053 )
Total Barnes & Noble, Inc. shareholders' equity   555,783     570,093  
Commitments and contingencies   -     -  
Total liabilities and shareholders' equity $ 1,935,358   $ 2,048,154  
 

       
BARNES & NOBLE, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share
(In thousands, except per share data)
(Unaudited)
             
 
13 weeks ended 13 weeks ended
July 29, 2017 July 30, 2016
Numerator for basic loss per share:
Net loss $ (10,778 ) $ (14,416 )
Less allocation of dividends to participating securities   (11 )   (203 )
Net loss available to common shareholders $ (10,789 ) $ (14,619 )
 
Numerator for diluted loss per share:
Net loss available to common shareholders $ (10,789 ) $ (14,619 )
 
Denominator for basic and diluted loss per share:
Basic and diluted weighted average common shares 72,453 72,903
 
Loss per common share:
Basic $ (0.15 ) $ (0.20 )
Diluted $ (0.15 ) $ (0.20 )
 

     
BARNES & NOBLE, INC. AND SUBSIDIARIES
Non-GAAP Reconciliation & Forward-Looking Statement
(In millions)
(Unaudited)
         
 

Forward-Looking
Fiscal 2018

 
 
EBITDA $ 180
Depreciation and amortization   (100 )
Operating income $ 80  

Media:
Barnes & Noble, Inc.
Mary Ellen Keating, (212) 633-3323
Senior Vice President
Corporate Communications
mkeating@bn.com
or
Investor:
Barnes & Noble, Inc.
Andy Milevoj, (212) 633-3489
Vice President
Corporate Finance and Investor Relations
amilevoj@bn.com

Source: Barnes & Noble, Inc.

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