David Abrams (Trades, Portfolio), the managing partner of value investment firm Abrams Capital Management, has continued to increase his position in the nation’s largest bookseller Barnes & Noble (BKS, Financial) as the company’s share price decreases.
Abrams added 3,012,109 shares of the company to his passive stake, up 43.5%, on Feb. 3 and 4. The company’s share price plunged almost 66% over the past year, closing at $8.30 per share Monday. After the buy, he held 9,930,883 shares, or 12.99% of Barnes and Noble.
Like the Seth Klarman (Trades, Portfolio)’s Baupost Group, where he worked for a decade before founding his own firm, Abrams runs a concentrated portfolio, containing 14 stocks. Barnes & Noble occupied 6% at third quarter-end. He also had a sizable interest in Barnes & Noble Education Inc. (BNED, Financial), its education bookstore arm that spun off of Barnes & Noble on Aug. 2, and has continued to like the company. In the fourth quarter 2015 and first quarter 2016, he reported buys of Barnes & Noble Education nine times.
The $478.4 million market cap spin-off has traded down roughly 31% since it began trading independently, closing at $10.18 Monday.
For its fiscal 2016 second quarter ended Oct. 31, reported Dec. 3, Barnes & Noble showed a 4.5% year-over-year decline in sales to $895 million, with sales of its e-reader NOOK falling 31.9%. The company also suffered a net loss of $39.6 million, compared to a net profit of $7.14 million a year earlier.
Barnes & Noble had $13.4 million in cash on its balance sheet at quarter-end, compared to $31.9 million in the previous year.
Last year, the company made new moves with its cash return to shareholders. During the first quarter when it completed the spin-off, it also initiated a quarterly dividend of $0.15 per share. In October, its board announced a maximum $50 million stock repurchase program.
The company is focused on increasing comparable store sales and reducing expenses, including those related to NOOK by cooperation with its retail business, and expects the positive impact to accrue for the fiscal year, the chief financial officer, Allen Lindstrom, said in a first quarter release.
Barnes & Noble has experienced slow growth over the past five years as it vied with competitors such as Amazon.com (AMZN, Financial). On an annual average basis, its revenue has declined a rate of 1.8%, EBITDA at 4.3% and book value at 2.5%.
For fiscal year 2016, Barnes & Noble expects comparable retail bookstore sales, excluding NOOK sales, to grow 1%, the same percentage as last year.
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