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GuruFocus has detected 2 Warning Signs with Barnes & Noble Inc $BKS.
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Barnes & Noble Inc (NYSE:BKS)
Gross Profit
$1,235 Mil (TTM As of Jan. 2017)

Barnes & Noble Inc's gross profit for the three months ended in Jan. 2017 was $437 Mil. Barnes & Noble Inc's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was $1,235 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Barnes & Noble Inc's gross profit for the three months ended in Jan. 2017 was $437 Mil. Barnes & Noble Inc's revenue for the three months ended in Jan. 2017 was $1,301 Mil. Therefore, Barnes & Noble Inc's Gross Margin for the quarter that ended in Jan. 2017 was 33.58%.

Barnes & Noble Inc had a gross margin of 33.58% for the quarter that ended in Jan. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Barnes & Noble Inc was 33.18%. The lowest was 24.60%. And the median was 30.47%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Barnes & Noble Inc's Gross Profit for the fiscal year that ended in Apr. 2016 is calculated as

Gross Profit (A: Apr. 2016 )=Revenue - Cost of Goods Sold
=4163.844 - 2836.547
=1,327

Barnes & Noble Inc's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

Gross Profit (Q: Jan. 2017 )=Revenue - Cost of Goods Sold
=1300.908 - 864.107
=437

Barnes & Noble Inc Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 265.758 (Apr. 2016 ) + 277.539 (Jul. 2016 ) + 255.375 (Oct. 2016 ) + 436.801 (Jan. 2017 ) = $1,235 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Barnes & Noble Inc's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

Gross Margin (Q: Jan. 2017 )=Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=437 / 1300.908
=33.58 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Barnes & Noble Inc had a gross margin of 33.58% for the quarter that ended in Jan. 2017 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Barnes & Noble Inc Annual Data

Jan07Jan08Jan09Apr10Apr11Apr12Apr13Apr14Apr15Apr16
Gross_Profit 1,6381,6411,5811,6771,8011,9181,6831,4191,4261,327

Barnes & Noble Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
Gross_Profit 286506300300270492266278255437
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