(Bloomberg) -- Barnes & Noble Inc., which posted a wider loss last quarter that sent its shares tumbling, is scaling back ambitions to become more than a bookseller.
The retailer had hoped that toys, games and other items would shore up its results, especially as Amazon.com Inc. ate away at its traditional business. But its non-book sales have flagged the past two quarters, and now the company is putting its focus back firmly on reading.
Barnes & Noble will “place a greater emphasis on books, while further narrowing our non-book assortment,” Chief Executive Officer Demos Parneros said in a statement.
The failed foray is just one of the challenges bearing down on the chain. Customer traffic is down, and Barnes & Noble is losing market share. Though the release of “Harry Potter and the Cursed Child” reinvigorated sales a year ago, the company is now paying for that blip: Same-store sales fell 6.3 percent last quarter, with about half of that decline coming from the drop-off in Harry Potter demand.
Barnes & Noble's Nook e-book business also has languished, a further sign of Amazon's tightening grip on readers. It all added up to a loss of 41 cents a share in the fiscal second quarter, compared with a deficit of 29 cents a year earlier. Analysts projected a 26-cent loss for the period, which ended Oct. 28.
The stock fell as much as 13 percent to $6.75 after the results were released, marking the worst intraday plunge in almost three months. That comes on top of a 30 percent decline so far this year.
The retailer made a “fairly aggressive decision” to clear out unsold merchandise in the quarter, Paneros said on the earnings call, and going forward will resume its focus on its main books business.
“It's simply who we are,” he said. “I mean, that's our heritage, that's what customers expect from us. It's the right decision.” The company will also improve results by shifting to “much smaller” store formats, he said.
Cash Burn
Barnes & Noble used twice as much cash in the first half of the fiscal year as in the year-earlier period. The loss from operations was $106.5 million, compared with $51.7 million last year. It has $40 million in cost cuts planned for the current fiscal year.
The company received a recent buyout proposal from activist investor Sandell Asset Management, but the company said it doesn't consider the bid credible, questioning the shareholder's ability to raise financing for the offer.
To contact the reporters on this story: Nick Turner in New York at nturner7@bloomberg.net, Lauren Coleman-Lochner in New York at llochner@bloomberg.net.
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder
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