Spinoffs often create interesting investment opportunities, and Barnes & Noble Education (NYSE:BNED) drew interest from investors when it first spun off from Barnes & Noble (NYSE:BKS) in mid-2015. The network of campus bookstores had the best growth prospects of its parent's subsidiaries, and coming into its fiscal third-quarter financial report on Tuesday, B&N Education investors had hoped to see modest gains in earnings and revenue. Instead, the company's results included a net loss driven by restructuring charges and declines in overall revenue and comparable-store sales. Let's look more closely at the latest from Barnes & Noble Education to see what's sending the company's stock lower.

Image source: Barnes & Noble Education.

Barnes & Noble Education flunks the test
Barnes & Noble Education's fiscal third-quarter results didn't give investors any of what they had hoped to see from the campus specialist. Revenue fell 0.6% to $518.4 million, which was far below the $534 million consensus forecast among those following the stock. The company posted a GAAP net loss of $3.6 million, which worked out to $0.07 per share. Even after allowing for restructuring charges and other extraordinary items, adjusted earnings of $0.10 per share were a penny shy of what investors had wanted to see.

Looking more closely at the company's results, B&N Education saw some troubling trends play out during the quarter. Comparable-store sales fell 4.1% during the quarter. The company said that later school openings continued to push sales of spring-term materials into the following quarter, and students have increasingly chosen to put off buying course materials further into their terms than in the past. Yet even after adjusting to add in three extra weeks of February, falling comps of 2.9% weren't all that encouraging, even though they were slightly better than what Barnes & Noble Education reported in its fiscal second quarter.

B&N Education also believes that weaker enrollment in certain areas of higher education are holding back its results. As CEO Max Roberts explained, "Course materials sales for the Spring Rush period were adversely affected by decreased enrollments in two-year community colleges." The company estimated that less demand from community college students was responsible for nearly 2 percentage points of the downward pressure on comps for the quarter.

Yet B&N Education thinks that it can work to improve its profitability. In particular, steps like closing its Yuzu offices and reducing staff should help it to reduce the expenses it incurs in delivering digital content to customers, replacing it by collaborating with outside provider VitalSource to build and share digital content. B&N Education also pointed to its acquisition of LoudCloud as a forward move for the company. In all, Roberts believes that "these actions give us the capabilities to offer digital products that our clients are demanding, improve our competitive position, and positively impact revenue and profitability."

What's ahead for B&N Education?
Still, the costs of B&N Education's efforts will linger into the future. The company said that it expects further restructuring charges of $7 million to $8 million in the current quarter, and another $1 million to $2 million will hit in the fiscal first quarter of 2017.

Moreover, B&N Education doesn't expect its comparable-store sales to rebound substantially in the near future. The campus specialist said that it expects comps to fall about 2% for the full 2016 fiscal year, which is consistent with its previous guidance. Even if cost-cutting efforts can improve the bottom line, B&N Education investors don't appear to be getting the sales gains that they had hoped to see.

B&N Education investors reacted negatively to the news, sending the stock down 11% in midday trading following the announcement. Unless adverse trends on campuses across the nation reverse themselves, Barnes & Noble Education could remain under pressure for failing to realize the full potential investors saw in the spinoff.

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