Holiday Key As Barnes & Noble Vies to Clear ‘Value-Priced’ Nook Inventory
Barnes & Noble is actively pursuing opportunities to “rationalize our Nook business,” CEO Michael Huseby said on an earnings call Tuesday. Nook content sales fell 21 percent in fiscal Q2 due to lower average selling prices and fewer device sales than the year ago quarter, Huseby said. To beef up content sales, Barnes & Noble is looking to grow sales within its active user base and by selling e-readers that are “closely aligned with selling content,” Huseby said. As an example, he cited the recent release of the latest Nook GlowLight with a lighter weight 6.2-ounce design, sharper text, advanced display “paper-like readability” and a redesigned interface that makes it easier to discover content and shop from the device.
Existing Nook inventory is selling with “value pricing” as expected, with the holiday season an important part of the company’s plan to sell through that inventory, Huseby said. Barnes & Noble is also focused on growing other channels of distribution, he said. On Monday the company said Nook for Windows 8.1 is available in 32 countries in 21 languages and Microsoft Live users can shop and read without having to set up an additional account. The company said previously it expected to be selling content in 10 international markets by mid fiscal 2013 as part of its commercial agreement with Microsoft. It now hopes to reach that mark by the end of its fiscal year in April, Huseby said. Barnes & Noble also said Tuesday that the Nook reading app is available for Samsung’s Galaxy Tab 3 via an over-the-air software update and will be pre-loaded on units shipped later this year.
Nook Media has been “self-financed” since its formation and that should continue by further cost reductions, converting existing device inventory into cash and with cash received from the college division along with cash payments received from Microsoft, Huseby said. Further cost reductions will come from new devices that haven’t been made public yet, he said. One of the strategies is to leverage relationships with other companies for Nook content, but the company does “understand the need to have devices in our stores and on our online shop because selling devices is the best way to get content attachment,” Huseby said. Getting content attachment via a client approach “is not as effective as selling devices,” he said.
On how the company plans to approach hardware in the future so it reaches break-even, Huseby said, “How we deliver those devices to the stores and to our online sales and wherever else we decide to deliver them is something we'll announce when we're ready to do it.” He affirmed, “We are in the device business to stay.”
Barnes & Noble posted earnings of $8.6 million for fiscal Q2 2014 compared with a loss of $3.9 million in the year-ago quarter but revenue was down in all categories, the company said. The Nook segment led all sales declines, falling 32 percent to $108.7 million, followed by a 7.5 percent drop in retail to $921 million and a 4.6 percent drop in the college bookstore unit to $737 million, it said. Retail declines were due to store closures and lower online sales, the company said. Nook sales -- including content, devices and accessories -- fell on lower average selling prices and reduced device sales, it said. Shares closed 6 percent lower at $15.45.