Barnes & Noble Doesn’t Know the Meaning of the Word "Plan"
Remember a month ago when B&N announced new plans for a new direction for the company? Today it seems that those plans are no more definite than the ones they replaced.
Len Riggio and other B&N senior management addressed the annual stockholder’s meeting yesterday. The meeting started off with a recap of B&N’s poor showing these past few quarters, a confirmation of the new retail site launching in April, and other old news, and then the meeting turned to future plans.
There was pressure from some stockholders for B&N to issue a dividend, which the senior management said that they were considering. There were also question about the possibility of selling off either the Nook division and Riggio deciding not to buy the retail stores, but neither was answered effectively.
Riggio & crowd were also less than forthcoming about how they plan to get B&N out of its current troubles. In fact, it’s not clear that they have a plan at the moment. From PW:
Once again, Riggio emphasized that “everything is on the table; we’re looking at all the doors. How we proceed depends on the opportunities we encounter. Some of you tell me you want a dividend, or a special dividend; others say sell one of the companies or others say split up the company. There are a lot of possibilities and not all of them mesh.”
Last month B&N announced that they had changed their minds and weren’t going to get out of hardware development; they had changed their minds and weren’t going to split up the company; and they had changed their minds and were going to focus more on a coordinated domestic retail push with a new site.
I called it.
Anyone care to take a guess just how many of those plans will still be around this time next month?
I don’t know, but I strongly suspect that many of the current plans are going to go out the window after this next holiday season.
Between the bad financial reports, contradictory statements from B&N management, and that disastrous interview from earlier this year (which revealed that B&N plans to close 20 stores a year for the next decade), B&N has damaged consumer confidence.
I’m afraid that is going to translate into poorer sales this holiday season, and if that happens then it could lead to an even more desperate scramble for a new plan.
flyingtoastr September 11, 2013 um 12:23 pm
Or they have to say that kind of stuff to keep a bunch of angry institutional investors who are screaming that BN needs to just sell off the company piecemeal to enrich their portfolios happy.
fjtorres September 11, 2013 um 12:31 pm
You have to wonder about shareholders in a company a stone’s throw away from Chapter 11 actually dreaming of bleeding off its limited cash to pay a dividend. Are they expecting a Chapter 7 filing instead?
If so, they’d be better off selling.
Nate Hoffelder September 11, 2013 um 12:37 pm
That was a little crazy, yes.
I was also shocked to learn that retirees still owned stock in B&N; they should have sold out when the stock peaked earlier this year.
flyingtoastr September 11, 2013 um 12:48 pm
How is BN anywhere near Chapter 11? The company is still cash positive and has almost no outstanding debt.
Alexander Inglis September 11, 2013 um 1:13 pm
B&N’s financial situation is not rosy. During Q1 (May – Jul), they added $348M in inventory — 41% increase.That is stuff hanging around stores and warehouses that isn’t selling.
They are carrying $1.1B in "goodwill, intangible assets" as part of the company value; a good portion could be at risk to simply write off. In fact, this category represents almost 30% of the company asset value.
It has just $80M in cash and is hoping to collect $154M in receivables. Meanwhile, its accounts payables is $1.1B. Worse, it has another $840M in "accrued liabilities and gift cards": these are bills it has to pay either on demand or is coming up within the next 12 months (essentially these are all IOUs it needs to make good on).
Last year, it lost money in Q2 (Aug – Oct); the year before, Q2 barely snuck through with a 2¢ pofit on every dollar of sales.
flyingtoastr September 11, 2013 um 1:41 pm
They also have only $7 million in outstanding debt with an unused $1 billion revolving credit facility. BN is in fine financial shape – there’s no reason they’re anywhere near needing bankruptcy.
Alexander Inglis September 11, 2013 um 6:53 pm
B&N is NOT in "fine" financial shape. The long term debt is $7M, but that’s smoke and mirrors. Management has simply punted debt that was over $300M at the end of Apr 2012 into a new category "Other long term liabilities" of $437M. A further $194M debt is in 8% interest bonds held by Liberty; and another $382M in funds supplied by Microsoft and Pearson to buy an interest in Nook Media. It is also sitting on $246M in deferred taxes (owing but not yet paid).
And a reminder of the $2B in short term (within year) obligations: accounts payable, gift cards and accrued liabilities.
The current Jun 24 2013 Amended Credit Facility runs abt 5% to access and is secured by assets: once invoked, B&N ties its hands on what it can and cannot do, including investments. Proceeds of the fund are used for general corporate purposes, including seasonal working capital needs. In past years, it needs at least half of this fund to acquire holiday inventory.
Finally, at fiscal year end Apr 2013, B&N reported an annual operating loss of $158M. The last year it turned an operating profit was 2010. Q1 end Jul 2013 is hardly promising: an operating loss of $64M or $87M including interest and taxes.
Paul September 11, 2013 um 1:17 pm
If it starts following the same pattern as other retailers though, its in the last few weeks of the year that it will make enough money to be profit.
Nate Hoffelder September 11, 2013 um 1:31 pm
Yep. B&N is just a single holiday season away from being as dead as Borders.
flyingtoastr September 11, 2013 um 1:43 pm
Except for the hundreds of millions of debt Borders had loaded up on with their failed international expansion, while BN has almost none
Nate Hoffelder September 11, 2013 um 7:30 pm
"B&N is NOT in “fine” financial shape. The long term debt is $7M, but that’s smoke and mirrors. Management has simply punted debt that was over $300M at the end of Apr 2012 into a new category “Other long term liabilities” of $437M. A further $194M debt is in 8% interest bonds held by Liberty; and another $382M in funds supplied by Microsoft and Pearson to buy an interest in Nook Media. It is also sitting on $246M in deferred taxes (owing but not yet paid)."
fjtorres September 11, 2013 um 1:59 pm
And for the past two years that quarter has eaten them up alive.
Companies that rely on credit to fund day to day operations in a shrinking business are not good turnaround candidates. The big danger is they said they are doing a new tablet this year, not a new eink reader, even though they said it is eink users that are buying the most ebooks, not app users and not tablet users.
john September 14, 2013 um 3:01 am
sony, amazon, and kobo all have new ereaders coming out this year; c’mon B&N, keep up!