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Suravi Thacker
Suravi Thacker
Articles (157) 

Will This Company Be Able To Outpace Amazon?

August 05, 2014 | About:

Online retailers such as Amazon.com (NASDAQ:AMZN) seem to be ruling the market largely. They have given a blow to many traditional retailers, and booksellers are not an exception. Booksellers have had a tough time after the emergence of online stores and e-books which have made reading books quite easy. In fact, the share of digital book sales has increased to 14% in 2013 from 2% in 2009, as a percentage of total book sales globally.

Therefore, this trend affected many booksellers such as Barnes & Noble (NYSE:BKS) and many others. These companies have become a victim to the growing popularity of online retailers and are finding it extremely difficult to cope up with the trend and register growing sales.

Signs of hope

Although most of the booksellers have had to lose their existence, Barnes & Noble is an exception. It has somehow managed to save its position despite declining revenue. In fact, the recent quarter, reported by the company, highlighted the strengths of the retailer as it managed to beat the Street’s expectations.

Its revenue grew 3.5% over last year, clocking in at $1.32 billion. The retailer witnessed strength in the college segment because of the back-to-school season. This helped in driving comparable store sales higher during the period, which grew 2.6%. Also, sales for this segment climbed more than 18%, helped by same store sales growth and back to school rush season.

However, the Nook segment was weak with a decline of 22.3% over the prior year’s quarter. The decrease was not only because of lower volumes, but also because of lower selling price. Nook is an electronic book reader and was introduced against Amazon’s Kindle.

The bottom line too improved to a loss of $0.72 per share, from a loss of $2.04 per share, in the previous year. Although it was able to manage its costs better, the company is still suffering to get a place in the industry.

What Next?

Barnes & Noble has planned to enter into a partnership with Samsung, a South Korean consumer electronics company, in order to manufacture co-branded tablets. The tablet, called Samsung Galaxy Tab 4 Nook, is due to be launched in August this year. This move makes Barnes & Noble an interesting pick since partnership with an electronics giant such as Samsung can help in boosting its revenue.

Further, Barnes & Noble is trying to focus on advertising its products and ramps up its marketing efforts so that it can make a larger impact on the minds of the customers. Also, it plans to spin off its nook business into a separate entity, since losses from this segment are eating into the other profitable segments.

Amazon is facing problems with some publishers, such as Hachette, an e-book publisher. The problem is related to price of e-books which enabled Amazon to stop taking pre-orders for Hachette books. This too can work in favor of Barnes & Noble since it is the largest bookstore chain after Amazon.

Summing it up

Despite all the prevailing problems, Barnes & Noble has been able to put up a great show in its latest quarter. Also, it has some favorable points working towards its growth, such as a new partnership deal with Samsung, increased advertising and a potential shift of publishers to Barnes & Noble. However, one should wait till the company starts showing signs of a complete turnaround.

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