Barnes & Noble breaks up with Nook

Barnes & Noble is to spin off its Nook business in a break-up that will see the overall company separate the bricks and mortar bookstores and Nook, which will also keep B&N’s college stores.

Sales have been falling in B&N’s bookstores but they have been surprisingly resilient and still make a decent profit, at $354 million for the year up to May.

Nook, however, has been a cash drain on the overall business, with massive losses incurred on developing hardware. The digital side has lost around $700 million in the last two years, although the loss was slashed in the last year to $218 million.

The college stores which are being bundled with the Nook business are profitable and brought in $114.6 million over the last year.

B&N’s financial year runs up to May and the figures they released this week for the fourth quarter show consolidated revenues rose by 3.5% to $1.3 billion compared with the previous year and the quarter saw a profit of $11.2 million compared with a loss of $124.6 million in the previous year.

For the overall financial year 2014, consolidated revenues fell by 6.7% to $6.4 billion but profit leapt to the best figure for four years at $251 million, a big turn-round from a profit of just $7 million a year ago.

Switch to content strategy

B&N’s CEO Michael Huseby says the company had begun to pivot their strategy from hardware to content with the signing of a partnership with Samsung.

The deal, which was concluded last month, means Nook software will be pre-installed on Samsung Galaxy Tab 4 tablets which will be branded as Samsung Galaxy Tab 4 Nooks and sold in B&N stores.

The retail business had revenues of $956 million for the quarter and $4.3 billion for the full year, up by 0.8% for the quarter but falling by 6% for the year. Store sales fell by 4.1% in the quarter and 5.8% for the full year.

Retail profit for the quarter stood at $53 million, about the same as last year, while the profit for the year fell by 6% to $354 million.

The Nook slump

The Nook business, which covers digital content, devices and accessories, saw a big slump in sales, with revenues of $87 million for the quarter and $506 million for the full year, down by 22.3% for the quarter and 35.2% for the year.

The hardware side was hammered, with sales of ereaders and tablets plummeting by 30% over the quarter to $25 million and by 45% for the year to $260 million.

Digital content sales were also hit hard, down by 19% to $62 million for the quarter and by 20% to $246 million for the full year.

Nook losses were $56 million for the fourth quarter and $218 million for the full year.

Microsoft has a 16% stake in Nook Media and is helping to pump cash into the business in a five-year deal that is scheduled to run until 2017.

The B&N business split is expected to take place by March next year.