Do Your Homework: Barnes & Noble Is Not A Dead Money Investment
Barnes & Noble Inc. (NYSE:BKS) is a very well-known company. Today the stock caught my eye after reporting its quarterly and year-end results, which showed a miss on earnings but a nice beat on revenues. In short, in this article I will lay out why the company, and subsequently the stock, is not dead money. For those who are unfamiliar, Barnes & Noble operates as a content, commerce, and technology company. The company operates in three segments: College, Retail, and NOOK. It provides access to books, magazines, newspapers, and other content through its multi-channel distribution platform. The company sells trade books, including hardcover and paperback consumer titles; mass market paperbacks, such as mystery, romance, science fiction, and other fiction, children’s books, eBooks and other digital content. It also offers NOOK products comprising NOOK HD, NOOK HD+, NOOK Simple Touch, and NOOK Simple Touch with GlowLight eBook reader devices and related accessories. It sells bargain books, magazines, gifts, café products and services, educational toys and games, music and movies.
It also sells textbooks and course-related materials, emblematic apparel and gifts, school and dorm supplies, and convenience and café items in college and university campuses. In addition, the company provides textbook rental services and electronic textbooks and other course materials through NOOK Study. The stock has been volatile. Most investors discounted the company as unable to compete with book selling at Amazon and Walmart, as well as the bevy of other e-readers on the market. The stock, however, is up 45 percent year-to-date as the company has restructured and refocused its efforts. In short, it is not a dead money investment as evidenced by its recent performance.
Barnes & Noble is coming back from the brink of extinction. Its fourth-quarter consolidated revenues increased 3.5 percent to $1.3 billion versus the prior year. Consolidated fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) improved to $11.2 million, as compared to an EBITDA loss of $124.6 million in the prior year. For fiscal 2014, consolidated revenues decreased 6.7 percent to $6.4 billion versus the prior year. Fiscal 2014 consolidated EBITDA increased to $251 million, as compared to $7 million a year ago. Wow. That is incredible.
The consolidated fourth-quarter net loss was $36.7 million, or $0.72 per share, as compared to the prior year net loss of $114.8 million, or $2.04 per share. Fiscal 2014 consolidated net losses were $47.3 million, or $1.12 per share, as compared to $157.8 million, or $3.02 per share, in the prior year. Again, this is amazing growth and improvement year-over-year. But how did each segment contribute to Barnes & Noble’s results?