Barnes & Noble beats expectations, falls short on e-commerce efforts

Dive Brief:

In line with previous quarterly earnings reports, Barnes & Noble’s fiscal 2017 year-end sales and earnings report revealed a 6.3% decline in total sales for the quarter and a 6.5% drop for the year, the company said in a press release. While same-store sales also fell, 6.3% in both the fourth quarter and the full year, the book retailer managed to beat Wall Street expectations, according to MarketWatch, and shares rose 3.1% before the market Thursday.
Barnes & Noble did see improvements in some categories, with online sales increasing by 2.9% in the fourth quarter and 3.7% for the year, as well as an improvement in net loss of $13.4 billion compared to last year’s $30.6 billion.
The bookseller ended the year with a consolidated EBITDA of $172.2 million, as compared to $150.5 million a year ago and predicts that 2018 will bring further same-store sales declines in the low single digits, as well as a consolidated EBITDA of $180 million.

Dive Insight:

The company’s year-end earnings report reveals the decline of a company struggling to handle e-commerce challenges and in need of a new approach to its brick and mortar storefronts. When considering why Barnes & Noble is struggling to get ahead, it’s hard to ignore the company’s frequent leadership shakeup. The bookseller elected four different CEO’s in as many years, perhaps limiting its ability to implement a stable turnaround plan.

Despite the high turnover in Barnes & Noble’s executive positions, current CEO Demos Parneros seemed pleased with the company’s cost reductions for the year and expressed his determination to continue making changes in 2018. "While fiscal 2017 proved to be a challenging year for the company, we reduced costs by $137 million, enabling us to sustain our profitability level," Parneros said in a statement. "In fiscal 2018, we are focusing on ways to improve the business and reignite sales through an aggressive test and learn process and companywide simplification process that will take out costs."

While reducing costs is certainly a must for Barnes & Noble, the store’s struggle in e-commerce is a significant barrier to profitability that isn’t getting enough attention. Decreasing interest in products cannot be the answer for future sales declines, as it was for the 2016 holiday season; in fact, Neil Saunders, managing director of GlobalData Retail, says the bookseller should ditch efforts with the Nook division, which has “little future” and focus more heavily on its online operations.

“This part of the business is in desperate need of attention, as is evidenced by the 2.9% growth rate for the quarter,” Saunders wrote in an email to Retail Dive. “This is an unsatisfactory outcome and shows that the small investments in digital made over the past year are not paying dividends. In our view, B&N is simply not an online destination for many shoppers buying books and associated items — something that the company needs to correct."