When we last took at look at Barnes & Noble, the US’s last remaining bricks-and-mortar book chain, the firm had seen an abrupt end to a partnership with Microsoft for the NOOK e-book reader and was looking to a new deal with Samsung to revive the prospects for the product.
Has that worked? Fair to say, not much sign of it just yet from last week's full year results.
The NOOK brand, covering devices, digital content, and accessories, had revenues of $52 million for the 4th quarter and $264 million for the full year, decreasing 39.8% for the quarter and 47.8% for the year.
Device and accessories sales were $13 million for the quarter and $86 million for the full year, declining 48.2% and 66.7%, respectively, due to lower unit selling volume.
Digital content sales were $40 million for the quarter and $177 million for the full year, down 36.5% and 27.8%, respectively, again reflecting lower device unit sales.
The firm has now abandoned earlier plans to spin off NOOK as a separate business and will instead keep it within the existing retail business. But plans to break off the profitable college books business will go ahead in the Fall. CEO Mike Huseby pitches the latest strategy shift as:
Our acquisition of the Microsoft and Pearson interests and of Media, which was the entity that held both the College and NOOK consumer assets, was an important positioning step that we took in fiscal 2015. That's enabling us to combine the retail and NOOK business, which both serve a common consumer book market.
By regaining a 100% ownership interest of our College business, we're able to form Barnes & Noble Education and take the steps necessary, which are proceeding at full pace to separate our education business so that it can soon become a separate public company.
Combining NOOK with our retail business will give us…the ability to provide Barnes & Noble customers any book, anytime, anywhere, in any format that they choose.
Huseby insists that the termination of the Microsoft interest in NOOK Media was a good thing:
First it gave us back ownership and operating control of these assets and the flexibility to combine the NOOK consumer business with retail where there is significant consumer market overlap. Second, this combination provides the opportunity for more efficient and integrated management and operation of the physical and digital book businesses, which should benefit both the top and bottom lines.
And there’s still need for benefit there, although there are some signs of encouragement. Barnes & Noble posted a loss of $19.4 million in its fourth-quarter, compared with a loss of $36.7 million last year, on revenue down 10% to $1.18 billion. But for the full year, the firm turned in a profit of $36.6 million, on revenue of $6.07 billion.
Turning the page?
So what’s next? Well another ‘benefit’ of Microsoft walking away is that Barnes & Noble can ook closer to home for growth. Huseby comments:
The termination of the Microsoft commercial agreement as part of NOOK Media transactiton has eliminated our obligations to expand internationally. We are continuing to evaluate our options with respect to our existing international customer base.
More positively perhaps, this week will see a relaunched website and e-commerce offering from the bookseller in a bid to expand its digital footprint. Huseby says:
With the upcoming launch of our new BN.com eCommerce platform, we can now take advantage of opportunities to streamline and consolidate systems and processes that are common to BN.com and NOOK.
Combining the NOOK digital operation with the retail group allows for a more common platform for both management of people, which relates also to how do we better integrate the marketing, go-to-market efforts of NOOK digital in the physical book market and also on our BN.com ecommerce efforts.
This relaunch and realignment will also result in some technology consolidation at the back end:
The technology platforms for NOOK and retail in terms of ERP are different. There's an opportunity to consolidate not just technology platforms, but processes and that means reduction of cost as well, not just personnel, but in terms of maintenance, hardware, software and maintenance those types of things.
It’s clear that despite Barnes & Noble’s emphasis on its real-world book stores, Huseby doesn’t want the market to think that the NOOK upheaval means any lesser commitment to digital investment:
Nobody is giving up, just the opposite, on trying to improve the content picture in terms of digital content. There are good ideas that both the retail and NOOK Management have as tp how we can better work together to push digital content and eventually stabilize the revenue picture for content from digital sources.
We're focused on connecting with our customers beyond the book store. We expect the website to be a valuable resource for customers whether they choose to have their orders shipped to home or made available for in-store pick up.
Other than that, Huseby is looking to a rash of new titles to kickstart business, citing Harper Lee’s “Go Set a Watchman,” a follow-up to the 55-year-old “To Kill a Mockingbird,” and the newly discovered Dr. Seuss title, “What Pet Should I Get?” as forthcoming publications that he hopes will drive traffic to the stores. The firm's already benefited from the surprise publication of E L James 50 Shades of Grey follow-up, Grey.
But of course, if you can get them cheaper on Amazon…
You can get current bestsellers like Stephen King’s Finders Keepers or E L James Grey cheaper on Amazon.com. Will that change with a revamped Barnes & Noble site?
But a redesign of Barnes & Noble’s clunky and old-fashioned looking website is certainly overdue, so let’s give a thumbs up for that.
That said, I like visiting book shops and I’ve particularly always enjoyed the US book shop experience, complete with sofas and coffee shops. It’s a model that UK book stores have tried to emulate, but with limited success to my mind. So I really do wish Barnes & Noble well in turning around the business.
But I’ve just placed an order with Amazon after browsing around my local Waterstones book store. I used the physical store to check out the book, then used my mobile in the store to order it at a lower cost with next day delivery from the online retailer.
I’m the kind of problem that Barnes & Noble needs to solve.