As predicted, it's been a bad quarter for Barnes & Noble. The company posted revenue of $2.2 billion, down 8.8 percent year over year, and Nook sales were hit particularly hard: revenue from the Nook segment was down 26 percent compared to last year's holiday season, though digital content sales climbed 6.8 percent. Combined with a decline in overall retail sales, that added up to a net loss of $6.1 million, compared to $52 million in income last year.
Barnes & Noble previously said it expected worse-than-anticipated Nook revenue, and in the earnings report it admitted they were due to "low device unit volume" and a "shortfall" over the holidays. Despite reports that it may be scaling back Nook hardware after several quarters of decline, however, the company says it remains "committed" to tablets and e-readers. Instead, it's trying to cut the cost of producing its hardware, while slicing prices even further to make up for the drop in sales.
Despite steep revenue drop, Barnes & Noble remains 'committed' to Nook hardware
The future of Barnes & Noble's retail business is also in question. Earlier this month, company chairman Leonard Riggio expressed interest in buying the bookstores, whose revenue dropped 10.3 percent year-over year as their numbers decrease. In its latest earnings report, Barnes & Noble said that an evaluation of the proposal was taking place, though no timeline is set and "there can be no assurance that the review of Mr. Riggio’s proposal or the consideration of any transaction will result in a sale." We'll be listening in on the company's earnings call for more information.
"We're not going to continue doing what we're doing."
Update: On its call, Barnes & Noble went into more detail about what the future of Nook hardware could look like, hinting that we might see more tablets and fewer e-readers in the future:
The market has shifted to multi-function tablets... We did a lot of work with the consumer post-holiday, and what we're seeing is that the bigger brands have more resonance in that multi-function tablet market than we do. We obviously have to adjust and change. So when I say we have a commitment, we do, but we also have a commitment to change the model and how we're approaching it. We address some of the perceived consumer shortfalls in our broader ecosystem. We'll have an announcement shortcoming. We're not going to continue doing what we're doing.
There was also consternation among shareholders about the proposed bookstore sale, which would split off Barnes & Noble's core business and one that's expected to remain much steadier than the flailing Nook segment. "I'm curious why Len is still chairman while he has pursued his own interests instead of those of shareholders," asked one attendee, whose followup remarks on the sale prompted Barnes & Noble to remark that "The loaded question you're proposing isn't really appropriate for us to discuss on this call."