Barnes & Noble’s Riggio Suspends Plan to Buy Retail Unit
Barnes & Noble Inc. (BKS) founder Leonard Riggio suspended his efforts to bid for the company’s retail unit as losses widen at the bookstore chain. The shares fell, more than erasing their gain for the year.
“While I reserve the right to pursue an offer in the future, I believe it is in the company’s best interests to focus on the business at hand,” Riggio said today in a filing with the U.S. Securities & Exchange Commission.
Riggio, 72, who is also the company’s chairman and largest shareholder, said in February he intended to make an offer to buy the company’s website and almost 680 stores. The bookseller, which has struggled to navigate the shift to digital content, today posted a wider first-quarter loss than analysts estimated amid a continued drop in Nook electronic-reader sales.
Riggio’s decision “is not surprising given that the Nook business has collapsed,” John Tinker, an analyst with Maxim Group in New York, said in a telephone interview. “The issue here is you have a lot of deal investors in the stock and there is obviously no deal today. I emphasize ‘today,’” said Tinker, who recommends buying the shares.
The stock tumbled 12 percent to $14.61 at the close in New York, for the lowest price since Feb. 22. Barnes & Noble erased all its gains for the year and finished the session down 3.2 percent for 2013, while the Standard & Poor’s 500 Index added 16 percent.
Barnes & Noble has reversed an earlier decision that had planned to outsource the building of its Nook tablets to a manufacturing partner and will continue to make black-and-white e-readers and color devices, Michael Huseby, the company’s president, said today. The Nook’s issues weren’t the design of the devices, rather the company’s poor job forecasting demand, he said.
“If we want to be in the content business, we need to be in the device business and we believe our people can develop devices better than anyone else,” Huseby said.
The net loss in the quarter ended July 27 was $87 million, or $1.56 a share, compared with a loss of $39.8 million, or 76 cents, a year earlier, the New York-based company said today in a statement. The loss excluding some items was 86 cents. Analysts projected a loss of 67 cents, the average of six estimates.
Sales declined 8.5 percent to $1.33 billion. Analysts projected $1.32 billion. Revenue at the Nook division fell 20 percent to $153 million, the third-straight drop.
After some success in its first two years, Nook took a step backward during the holidays. New devices flopped, forcing discounting that accelerated losses. Then in June, the company said it would stop making tablets, and a few weeks later CEO William Lynch, who oversaw Nook, stepped down.
The company didn’t name a successor to Lynch and moved Huseby from chief financial officer to president of the company and CEO of Nook Media, which includes the digital division and its college-bookstore arm. He reports to Riggio.
Barnes & Noble created Nook Media last year with an eye toward separating it from the retail arm. Now the company is focusing on better aligning all three units, Huseby said.
“Right now, it’s not the right time” to separate the businesses, Huseby said today.
Riggio, who still owns about 30 percent of the bookseller’s stock, founded the company in 1965 with a college bookstore in Manhattan. Six years later, he bought the Barnes & Noble name and its flagship store, beginning a spree of acquisitions, including Doubleday Bookshops. The chain started focusing on superstores, instead of mall sites, in the 1990s, and now has more than 700.
To contact the reporter on this story: Matt Townsend in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Robin Ajello at email@example.com