B&N earnings: Nook Simple Touch drags revenues down, though digital content sales are up

Barnes & Noble (s BKS) reported Q4 revenues of $1.4 billion for the period ended April 28, on losses of $1.08 per share. Following Microsoft’s $300 million investment during the quarter, B&N is now breaking out the Nook segment separately in its earnings. Nook revenues were $164 million for the quarter and $933 million for the fiscal year ending April 28.

Nook Simple Touch hurts revenues, but digital content sales increase

B&N defines the Nook segment as devices, digital content and accessories. Revenues were $164 million for the quarter, down 10.5 percent from this time last year, though B&N says “comparable sales” increased 1 percent in the quarter. For the fiscal year, revenues were $933 percent, up 34.3 percent over last year.
Device sales were down in Q4, B&N says, “due to higher third-party channel returns, lower selling volume and lower average selling prices.” In fact,┬áNook Simple Touch (B&N’s black-and-white e-reader) sales during the holidays were so bad that Barnes & Noble downgraded its guidance for the year. In today’s report, B&N says “in order to optimize the supply chain for new products, [it] took back Nook Simple touch inventory following the previously announced holiday sales shortfall.”
Digital content sales — e-books, digital newsstand and apps — were up 65 percent for the quarter and 119 percent for the year, “growing comparable digital content sales to $483 million for the full year.” Digital content sales weren’t broken out for the quarter.”

BN.com sales (not including Nook) down for the quarter and the year

Now that Barnes & Noble is breaking out the Nook segment separately, it folds BN.com sales into its retail segment, along with bricks-and-mortar store sales. Retail sales were $1.1 billion for the quarter, up 0.5 percent over last year, and $4.85 billion for the fiscal year, down 1.5 percent.” Although B&N is no longer breaking out BN.com sales separately, it says “BN.com sales continued to decline for the quarter as well as the fiscal year.”
Comparable bookstore sales increased 4.5 percent in the quarter and 1.4 percent for the fiscal year, benefiting from Borders’ liquidation, “Hunger Games” and “Fifty Shades of Grey” sales and “increased sales of Nook products” — though keep in mind that B&N is now reporting Nook sales separately and adds, confusingly, “Core comparable bookstore sales, which exclude sales of Nook products, increased 6.9 percent for the quarter and 0.7 percent for the full year.”

What’s next: International markets, new stores

In an investor call following this morning’s earnings report, B&N CEO William Lynch noted that the company now holds “25 to 30 percent” of the e-reader market (unchanged from previous estimates). It plans to announce international plans “soon,” moving into “10 markets within the next 12 months.” Barnes & Noble was widely believed to be entering a partnership with UK bookstore chain Waterstones, but Amazon got that deal instead.
Lynch also said B&N will open a “handful of stores” with “a new merchandising format” in the coming year.