Barnes & Noble Looks Ahead As Losses Widen

Image source: The Motley Fool.

Barnes & Noble (BKS) released fiscal fourth-quarter 2016 results Wednesday after the market close. Shares of the bookseller bounced almost 6% in after-hours trading in response, practically recouping the stock's similar decline during the regular session leading into the report. Let's look at what Barnes & Noble accomplished in its latest quarter.

Barnes & Noble results: The raw numbers

Data source: Barnes & Noble. 

What happened with Barnes & Noble this quarter?

• Earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at a loss of $26 million, a figure that includes a previously disclosed $20.9 million pension settlement charge. 
• Barnes & Noble's quarterly net loss from continuing operations excluding that charge would have been $17.8 million, or $0.24 per share.
• Retail sales fell 2.2% year over year, to $850 billion, primarily because of lower online sales and store closures. 
• Comparable-store sales fell 0.8%, making full-year comparable-store sales flat with fiscal 2015 -- in line with guidance.
• Retail "core" comparable-store sales -- which excludes sales of Nook products -- also fell 0.8% year over year.
• That brought full-year core comparable-store sales growth of 0.4%, slightly below guidance provided last quarter for the metric to rise 1% for the full year.
• Retail EBITDA came in at a loss of $11.1 million, including the pension settlement charge. Excluding the charge, retail EBITDA would have been $9.8 million, representing a $23.3 million decline from the same year-ago period, driven by a combination of lower sales, increased promotions, and higher store wages and benefits.
• Nook sales fell 33.3%, to $51.7 million.
• Nook EBITDA losses were $14.9 million, including roughly $4 million of expenses for further cost structure rationalization activities.
• Full-year Nook EBITDA losses narrowed to $64.7 million, compared with a loss of $83.9 million last fiscal year.
• The company paid $11.3 million in dividends and repurchased 964,000 shares for $10.2 million (or an average price of $10.61 per share).

What management had to say 

Barnes & Noble CEO Ron Boire stated:

As we look ahead to fiscal 2017 and beyond, we are focusing on executing a number of initiatives to grow bookstore and online sales, reduce retail and Nook expenses, and grow our membership base. We believe our marketing, merchandising, and membership initiatives will lead to increased traffic and conversion in our stores. We are also excited about our plans to open four new concept stores opening later this year, beginning with the first store opening this October in Eastchester, N.Y. We look forward to discussing these initiatives at our Investor Day.

Looking forward 

For the full fiscal year 2017, Barnes & Noble anticipates comparable-store sales to fall within a range of roughly flat to a 1% increase over fiscal 2016. That should translate to consolidated EBITDA of $200 million to $250 million, including retail EBITDA of $240 million to $280 million, and narrowing Nook EBITDA losses, to a range of $30 million to $40 million, including transitional costs.

While this guidance might not seem impressive on the surface, it does represent notable improvement, as Barnes & Noble works to narrow its Nook losses and return its overall business to sustained growth and profitability. Though retail comps this quarter were a point of concern, Barnes & Noble should be able to appease investors if it's able to deliver on its promise for continued progress in the coming fiscal year.