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Why Barnes & Noble, Inc. Stock Popped Today

By Steve Symington – Nov 22, 2016 at 4:35PM

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The bookseller was up after beating earnings estimates for its most recent quarter. Here's what investors need to know.

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What happened

Shares of Barnes & Noble Inc. (BKS) jumped 10.5% Tuesday, after the retail bookseller announced stronger-than-expected fiscal second-quarter 2017 results.

So what

Quarterly revenue fell 4% year over year, to $858.5 million, including a 3.5% decline in retail sales -- which includes revenue from Barnes & Noble stores and -- to $830.7 million, and a 19.4% decline in Nook product sales, to $35 million. Comparable-store sales fell 3.2% due to lower store traffic.

On the bottom line, that resulted in a consolidated net loss of $20.4 million, or $0.29 per share, narrowed from a loss from continuing operations of $27.2 million, or $0.36 per share, in the same year-ago period. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $0.7 million, compared to an adjusted EBITDA loss of $20.5 million in last year's fiscal second quarter.

By comparison -- though we don't pay close attention to Wall Street's near-term expectations -- note that analysts' consensus estimates predicted Barnes & Noble would turn in a wider net loss of $0.34 per share on slightly higher revenue of $859.8 million.

Now what

Barnes & Noble chairman and CEO Len Riggio acknowledged his company's relative top-line shortfall, stating, "While we are pleased to have improved our performance due to expense reductions, we did experience sluggish sales, which we believe are directly related to the election cycle. With the election behind us, we hope and expect sales will improve over the holidays."

Barnes & Noble continues to expect full fiscal-year 2017 comparable-store sales to decline in the low single digits, and for full-year consolidated EBITDA to be in the range of $200 million to $250 million. That includes retail EBITDA of $240 million to $280 million, excluding charges related to cost-reduction efforts and its recent CEO departure, and Nook EBITDA losses of $30 million to $40 million.

All things considered, this wasn't exactly a glowing performance from Barnes & Noble. But investors are right to be encouraged by its profitability improvements and optimism as it heads into the crucial holiday season. It's no surprise to see shares trading higher right now.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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