I know, I know -- it seems like I end about 90% of my pieces with some version of "I like the company ... but I wish the stock were cheaper." Well, what can I say? I'm a cheapskate and I like to wait for bargains in the stock market (since it's the best way to reduce my overall risk).
And so let's flash back to March when I last talked about Barnes & Noble
The reason the stock is getting cheap is most likely because folks are frustrated with what they see as a sluggish (at best) growth environment for this huge retailer of books and music. Sales growth last quarter was just 2%, with comp-store sales in the flagship down a bit, and guidance for the next quarter was actually for negative comp-store performance.
Like most other big-box retailers, this is a system that is powered by sales. Although gross margins were a bit higher this quarter, operating income fell 11% (in part because of stock option expense). And the absence of a Harry Potter-sized bestseller last year isn't going to help the next quarter.
I'm not going to defend the growth outlook for Barnes & Noble. The company is apparently finding it increasingly difficult to locate good sites for new stores and it already direct-sources about 90% of its books (i.e., gets the books directly from the publisher rather than from a wholesaler). But let's keep this in perspective. This isn't a story like Amazon
Instead, this is a story about producing cash flow -- cash flow that will ultimately fund future stock repurchases and/or dividends. Accordingly, if this stock continues to slide on worries about growth, long-term value hounds might want to thumb through the pages and see if it's not worth pulling off the shelf.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).