Wall Street analysts tore into Barnes & Noble executives Tuesday morning after the struggling bookseller reported stunning losses for the previous three months.
At a conference call following the release of results, analysts called the company's leaders slow and ineffective. They zeroed in on the company's Nook e-reader as a sign of failure, demanding payout for "long-suffering" shareholders. Barnes & Noble reported a loss of $87 million in the last quarter, and it attributed about $54.6 million of that to its Nook unit.
Following the release of quarterly financial results but before the earnings call, shares in the nearly century-old bookseller plummeted 13 percent Tuesday morning to just north of $14.50. As management detailed its vision for the company to analysts, the sell-off intensified, with shares selling as low as $13.90.
The decisions of the board “sound more reactive than proactive,” David Derman, an equity analyst with Chesapeake Partners, said during the call. Derman had asked the management what steps were being taken to maximize the value of the company’s stock.
Analysts were especially peeved at the bookseller for deciding to double down its focus on the company’s Nook line of tablets, moving attention away from its more successful bookstore operation in spite of the fact that the business segment has been a consistent money loser for the firm. Sales inside the company’s Nook unit, which includes devices, accessories and content, dropped by 20.2 percent in the last quarter when compared to a year ago. The company described the problem as “lower unit selling volume.”
The struggle over the Nook comes at a time when e-books have decimated the traditional publishing business. The Nook has also struggled to compete with other tablets and e-readers, most notably the iPad and Kindle.
“It’s been over a year since you guys have said that you want to do things to enhance shareholder value,” Rick Schottenfeld, an analyst with Coyote Capital who said he estimated Nook had resulted in losses of over $1.5 billion for Barnes & Noble since November of 2009. “At some point are shareholders going to get a relief from this Nook business and get an opportunity to realize some of that value?”
Management defended its strategy, saying the company believed in the inherent promise of its Nook offerings.
“One thing I would say -- and I want to say this -- is that the problem is not the devices,” Michael Huseby, president of Barnes & Noble, said. “The devices, the hardware and software that members of our team have produced over the last four years, are great devices -- and right now they’re in the market at great value.”
Huseby, who took over the top corporate job at the company in July 2013, said that it isn't devices, but inaccurate demand forecasts, that are creating a problem.
Derman, the Cheseapeake analyst, challenged Huseby to explain why it even made sense to keep the various Barnes & Noble units together under the same corporation. Derman asked if Huseby was truly representing the interest of all shareholders, including “particularly long-suffering” long-term shareholders
“I personally represent all the shareholders,” Huseby shot back.
“Look, I’ve been through this a lot,” Huseby later added. “I know where my fiduciary responsibilities lie and they lie in representing the interest of all shareholders -- including you."