Some four months have passed since B&N announced plans to spin off its college stores into a separately owned company called B&N Education.
There has not been much news to report on the topic since then, but Shelf Awareness noticed this week that Barnes & Noble filed an updated prospectus with the SEC.
The short version is that B&N is still pushing forward, the new company will be owned by the same stockholders as B&N, and the same people named in February are still going to be running B&N Education. Also, B&N has picked up 3 additional contracts to run college stores (717 stores in total).
If you want to read it, SA detailed the prospectus at length. I was going to write it up myself, but a spot check of the older copies of the prospectus doesn't show many significant differences.
There are a few financial details worth noting:
In its most recent fiscal year, ended May 3, 2014, B&N Education revenue slipped 0.9%, to $1.747 billion, and net earnings rose 16.3%, to $35.1 million. In the first three months of the current fiscal year, ended January 31, revenues rose 3.6%, to $1.5 billion, and net earnings fell 43.8%, to $19.4 million.
Sales at stores open at least a year fell 0.7%, affected by an increase in textbook rentals, which was partly offset by stronger emblematic apparel sales.
As of the end of January, B&N Education operated 717 stores, which reach 24% of the total number of college students in the U.S.--about five million students. The company has 455 contracts to operate the stores, some of which cover multiple locations, and 158 of the stores are co-branded with the Barnes & Noble name. B&N Education estimates that its 717 stores are 16% of the number of college stores run nationwide.
The prospectus is highly optimistic as to the new company's prospects.
I, on the other hand, can see that B&N Education faces strong competition in a declining market. It's not just that students are buying less from their college bookstores, or that B&N Education's digital textbook offering is a train wreck, but also that it has a couple established competitors (Follett, Nebraska Book Co) as well as an aggressive newcomer with extensive retail experience and a kill-all-the-prisoners attitude.
Amazon is aggressively soliciting colleges to let it run a virtual bookstore on campus (like the one at Purdue University). They only run a few stores at the moment but as B&N reported in its prospectus the market is wide open. According to B&N, 53% colleges still run their own bookstores. While that is a prime opportunity for B&N, it's also fertile field for Amazon.
image by brewbooks