QUOTE AND NEWS
DailyFinance  Dec 5  Comment 
Filed under: Company News, Earnings, Retail, Market News, Investing www.amazon.com There were plenty of winners and losers this week, with a leading automaker failing to keep up with its peers and the top dog in online retail breaking into an...
Benzinga  Dec 5  Comment 
On CNBC's Stock Pops & Drops, Guy Adami said that a 1.93 percent decline in CSX Corporation (NYSE: CSX) is just a pullback and the stock is going to continue to trade higher. Karen Finerman wouldn't buy Barnes & Noble, Inc. (NYSE: BKS) after the...
TheStreet.com  Dec 4  Comment 
SAN FRANCISCO ( TheStreet) – Microsoft gained momentum after an analyst boosted his price target on the company in addition to Barnes & Noble announcing it would pay Microsoft more than $62 million in a cash-and-stock deal to repurchase...
MarketWatch  Dec 4  Comment 
Bookseller’s shares fall 14%, as news of a split with Microsoft raises concerns it may not succeed in separating its Nook Media and bookstore businesses.
Benzinga  Dec 4  Comment 
Kindred Biosciences Inc (NASDAQ: KIN) -30% - Late Wednesday the company announced plans to stop its Atokin Study. Following the announcement Leerink Swann analysts downgraded the stock. Christopher & Banks Corporation (NYSE: CBK) -27% -...
Jutia Group  Dec 4  Comment 
[Reuters] - (Reuters) - Bookseller Barnes & Noble Inc said it would buy Microsoft Corp's 17 percent stake in its Nook business, comprising e-readers, e-books and college bookstores. The company said its total revenue ... Read more on this. ...
MarketWatch  Dec 4  Comment 
Barnes & Noble Inc. shares dropped 6% in premarket trading on Thursday after its fiscal second-quarter profit fell sharply below Wall Street expectations, and it said it was ending its commercial agreement with Microsoft . Profit in the quarter...
Wall Street Journal  Dec 4  Comment 
Barnes & Noble terminated its commercial agreement for its Nook e-reader with Microsoft, a move it said provides a clearer path toward the potential split of its business.




 

Barnes & Noble (NYSE:BKS) is the largest bookseller in terms of sales revenue in the United States.The company operates 1300+ stores and an online retailer Barnes & Noble.com. Its core business model relies on building local bookstores with comprehensive selection, attractive discounts and membership discount programs, and a community-gathering-place environment (e.g., the inclusion of a Starbucks cafe in each Barnes & Noble store).

Barnes & Noble has been suffering from diminishing margins as sales in the company's retail store struggle. Declining operating margins were mainly caused by higher discounts offered to compete with lower-priced online booksellers, one of the main negative pressures the print industry is facing right now due to a number of negative industry trends. To mitigate the company's slower retail book sales, Barnes & Noble has put a large amount of resources into the developing eBook market. As the demand for portable and low-cost books increases, the market for eBooks and eReaders will grow as well. Barnes & Noble's Nook offers wireless connectivity and access to millions of books. The company does face intense competition in the relatively young market, primarily from Amazon's Kindle 3, which has many of the same features as the Nook. The two companies have been engaged in price wars over the eReaders, something that is risky for Barnes & Noble. The two competitors also face competition from non-exclusive eReaders such as Apple's iPad.

Company Overview

Business Segments

Although the company does not give specific breakdowns of its business segments, it sells products in these general categories:

  • Books: Barnes & Noble stores offer a comprehensive selection of titles of trade and mass market books, ranging from 60,000 to 200,000 titles per store. Bestsellers represent 3-5% of all BKS sales.
  • Music/DVDs: Many Barnes & Noble stores have music/DVD departments, which range in size from 1,300 to 6,000 square feet and typically stock over 30,000 titles. The company’s DVD selection is focused on foreign films, documentaries and episodic TV shows.
  • Periodicals: Stores sell popular magazines and journals
  • Children's Books
  • Cafe: Each Barnes & Noble store features a cafe, serving Starbucks brand coffee and a range of baked goods. Starbucks (SBUX).

Business Growth

FY 2010 (ended May 1, 2010)[1]

  • Net income decreased 52% to $36.7 million.
  • Net sales increased 13.4% to $5.8 billion.

Trends and Forces

The eBook Revolution

The electronic book (eBook) revolution has arrived. Electronic readers (eReaders) offer portability and storage, language attributes, low cost for book purchases, access to millions of free books, and a smaller carbon footprint compared to print books among other benefits. As a result, eBook demand has skyrocketed, with revenue in the industry reaching $398 million in 2009 and expected sales to be $2.5 billion by 2013.[2]

The eBook revolution has spurred companies like Barnes & Noble and Amazon to develop their own eReaders. The two top eReaders in the market by sales are Barnes & Noble's Nook and Amazon's Kindle 3.

From Traditional to the Digital Market

Much of the slowdown in the sales revenue of the print retailers may be attributed to the increasing popularity and convenience of online retailers, especially Amazon.com. In fact, Barnes & Nobles expects the physical book market to decrease from $21 billion to $19 billion by 2013. Many online retailers are also a part of the CD and DVD retail segment, where Barnes & Noble has limited its exposure so as not to suffer from lagging sales of CDs due to digital media devices (mp3s), another edge for online retailers. To compete in the e-commerce sphere, Barnes & Noble established its own online retailing website.

Competition

The retail book market is slow to change and is at this point closed off from new superstore entrants. Barnes & Nobles looks to use its strong position as the leading U.S. bookseller to capitalize on its contracts with Starbucks for in-store cafes to maintain and grow its market share. Barnes & Nobles competes on two fronts, with other physical retailers and with internet booksellers.

Traditional Book Retailers

Barnes & Noble competes with other companies who share its model of having massive book superstores with thousands of titles.

  • Borders Group (BGP): Borders was the second largest book retailer in the U.S. and the largest mall-based bookseller in the country until it went bankrupt in 2011.
  • Books-A-Million (BAMM): Books-A-Million is a book retailer primarily in the southeastern US and is the third-largest book retailing chain in the country.

Online Booksellers

Amazon.com is the largest online competition for Barnes & Noble. Formerly partnered with Borders, Amazon offers the convenience of never having to leave your home to buy a book. Additionally, without some of the overhead inherent for B&M stores, Amazon.com can offer low prices or free shipping, leading to further price competition. Amazon also competes with Barnes & Noble's Nook in the eReader market with the Kindle 3.

Retail Megastores

Wal-Mart and Target are the main retail megastores, which sell everything from books to clothes to groceries. Despite not being a core sales segment of their business, these larger stores have had an impact on the sale of books by making best sellers more widely available. This puts pressure on traditional book retailers like Barnes & Noble to cut prices on bestsellers to retain store traffic, leading to diminished margins.

References

  1. BKS 2010 10-K "Selected Consolidated Financial Data" pg. F-1
  2. ZD Net "Kindle vs. Nook: The price war is on; E-reader shipments to surge?" 21 June 2010
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