The Siren Song of Barnes & Noble

There are broken machines that you still love, and Barnes & Noble is one of those for me.

Feb 1, 2014 at 7:30AM

As a teenager, you probably knew that one guy who had the horrible, but oddly functional, car. My main memory of this trope comes from college. I had a good friend who drove a Ford pickup from the sixties. Nothing inside worked, the windows didn't go all the way up, and you could see the highway through the floor on the passenger side. Somehow, I rode hundreds of miles in this beast, watching it decay -- sometimes actually feeling it decay as we pulled off nonessential parts by accident.

The unaccountable reason that I continued to climb in that truck is the same reason I haven't given up on Barnes & Noble (NYSE:BKS).

Watching the wheels fall off
As you may have heard, holiday sales are a big deal for retailers. Barnes & Noble dropped the ball, with holiday retail sales falling 6.6% during the previous year. That is very bad. Digital sales were the worst part of the whole mix, with the Nook segment's revenue falling more than 60%. This is where you climb into the car, as the driver gets out and opens the hood to fix that "wire I forgot to hook up."

Looking further back, before the holidays, Barnes & Noble announced that the SEC was investigating the business for questionable accounting practices. Don't worry about that... it was just the muffler falling off into traffic. That was the point where I felt like I could make a clean break -- just get out and be done with it -- but I kept coming back.

Why would anyone invest in Barnes & Noble?
There are almost no rebound stories that I believe in the investing world. Turning your brand around once it's taken a beating is a difficult proposition. Best Buy has also made a go of the rebound, tying windshield wipers on with twine, and using the one functioning headlight's high beams to make up for its loneliness. Things were going great until the holidays -- now things are going OK.

Holiday comparable-store sales fell 0.9% during the holidays, with total revenue dropping 2.5%. Just when it seemed like the business was growing -- in the first nine months of the fiscal year, operating income grew 89.8% -- everything crumbled.

The reason Barnes & Noble keeps me coming back is that it seems to have a solid business at its core. Selling books to people in stores is something that humanity has been doing for hundreds of years. Barnes & Noble is now the only game in town. The potential at Barnes & Noble is why I can't get away, and it's why I still like the company and the stock.

Revenue from brick-and-mortar bookstores reached more than $7 billion in 2012. Barnes & Noble's "last man standing" position means that a huge portion of that business is open to it. With a market that large, the rise of e-books -- even if Barnes & Noble were out of the game -- doesn't stop Barnes & Noble from being a powerhouse. Unfortunately, the company is still having a hard time converting those sales, as the comparable-store sales have shown.

One last concern
The one caveat to my devotion is if it turns out that Barnes & Noble did cook the, er, books any in way. As a current investment, that outcome makes this a very risky option. Imagine that car you kept climbing into suddenly had deteriorating brake lines -- that should give you pause. But who knows, maybe the car still gets there and you have the time of your life.

But, really, you could crash.

Finding a functional ride for the rest of the year
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Ford. The Motley Fool owns shares of Barnes & Noble and Ford. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers