Barnes and Noble sees quarterly sales surge, losses fall to $41 million

Barnes and Noble sees sales surge, losses fall as quarter ends in profit

Barnes & Noble has had a quarter worth remembering, bringing in $1.5 billion and reducing its losses to $41 million -- down from $57 million last year. Retail business was up, thanks to the closure of Borders branches and blockbuster sales of Fifty Shades of Grey, while College sales increased quarterly losses by $2 million to $14 million. While online sales fell 7.6 percent and the Nook business remained flat, the company saw digital content purchases skyrocket by 46 percent -- and the company couldn't produce enough GlowLight devices to satisfy demand. Wondering about the company's tie-up with Microsoft? There's still no news beyond that it hopes the new partnership will be up and running by the fall.

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Barnes & Noble Reports Fiscal 2013 First Quarter Financial Results

Digital Content Sales Increase 46%

Bookstore Comparable Sales Increase 4.6%

Retail EBITDA Increases 88% to $75 million

New York, NY (August 21, 2012)-Barnes & Noble, Inc. (NYSE: BKS) today reported sales and earnings for its fiscal 2013 first quarter ended July 28, 2012.

First quarter consolidated revenues increased 2.5% to $1.5 billion as compared to the prior year. First quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) was $4 million as compared to a loss of $24 million a year ago. The consolidated first quarter net loss declined 28% as compared to the prior year to $41.0 million, or $0.78 per share.

"During the first quarter, we continued to see improvement in both our rapidly growing NOOK business, which saw digital content sales increase 46% during the quarter, and at our bookstores, which continue to benefit from market consolidation and strong sales of the Fifty Shades series," said William Lynch, Chief Executive Officer of Barnes & Noble. "The growth in comps at retail and the continued strong growth of our digital content business, as well as increased cost management focus, were drivers in the business turning from an EBITDA loss last year to slightly positive EBITDA in the first quarter of this year. As announced yesterday, we are excited to expand our award winning NOOK digital bookstore and devices beyond the U.S. market and to work with U.K. retailers to bring millions of U.K. customers the best experience in digital reading."

First Quarter 2013 Results from Operations
Segment results for the fiscal 2013 and fiscal 2012 first quarters are as follows:

2013 1Q Financial Results

The Retail segment, which consists of the Barnes & Noble bookstores and businesses, had revenues of $1.1 billion for the quarter, increasing 2% over the prior year. Comparable bookstore sales increased 4.6% for the quarter, as compared to the prior year period. Comparable bookstore sales continued to benefit from the liquidation of Borders' bookstores in fiscal 2012 and strong sales of the Fifty Shades of Grey series. Core comparable bookstore sales, which exclude sales of NOOK products, increased 7.6% for the quarter. sales continued to decline for the quarter.

Retail earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $40 million to $75 million during the first quarter, an 88% increase, driven by comparable sales increases, a higher mix of higher margin core products and increased store productivity.

The College segment, which consists of the Barnes & Noble College bookstores business, had revenues of $221 million during this non-back-to-school rush period. Comparable College store sales decreased 2.0% for the quarter, as compared to the prior year period. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period.

College EBITDA losses increased by $2 million during the quarter from a loss of $12 million a year ago to a loss of $14 million, driven by new store expenses and investments in digital education.

The NOOK segment, which consists of the company's digital business (including Readers, digital content and accessories), had revenues of $192 million for the quarter, essentially flat as compared to last year. Digital content sales increased 46% for the first quarter. Digital content sales are defined to include digital books, digital newsstand, and the apps business. Device sales declined for the quarter due to lower average selling prices and production scaling issues surrounding the popular newly launched GlowLight product resulting in unmet demand.

NOOK EBITDA losses increased by $6 million, from a loss of $51 million to a loss of $57 million, as a result of product markdowns on the recently announced NOOK price adjustments, as well as continued investments in the NOOK business.

Newco Formation
On April 30th, the company announced that it has formed a strategic partnership with Microsoft to form a new subsidiary, Newco, which is comprised of the company's NOOK digital and College businesses. The company continues to be actively engaged in the formation of Newco and is in the process of implementing the work necessary to complete the Microsoft transaction. The company expects the Microsoft transaction to close this Fall.

Fiscal 2012 Segment Information
On June 19, 2012, the company announced that it completed an evaluation of its reporting segments, and reported fourth quarter and full year results for a new NOOK operating segment. At the end of this release, the company is providing segment information for all four quarters of fiscal 2012.