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Why Barnes & Noble Stock Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Barnes & Noble  (NYSE: BKS  ) were looking smarter today, jumping as much as 10% after the company announced in its fourth-quarter earnings report that it would separate its Nook media unit from the core bookselling enterprise.

So what: Several analysts had called on the bookstore chain to ditch the flailing e-book division, a move the company had long considered, and today it complied, reaping cheers from Wall Street. The Nook was once seen as B&N's savior, but the unprofitable e-book unit is now dragging on an otherwise profitable retail chain, and Nook sales fell 22% in the fourth quarter of 2013. The Nook will become a separately traded public company by March 30 of next year.

Now what: Chief Executive Officer Michael Huseby said the decision gave the company the "best chance of optimizing shareholder value," and that the soon-to-be separate companies will maintain a close relationship. Meanwhile, in its earnings report, Barnes & Noble said revenues increased 3.5% to $1.3 billion, while its adjusted net loss improved from $2.07 a share to $0.96. For fiscal 2015, which ends next May, management expects a low-single-digit decline in sales, but the significant decrease in losses is certainly a positive sign for the bookseller. With the Nook now on its own, a profitable Barnes & Noble seems more likely, but there are still significant challenges for the company to overcome before I'd bet on this stock making a full comeback.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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9/2/2015 4:01 PM
BKS $15.74 Up +0.49 +3.21%
Barnes & Noble CAPS Rating: *