Barnes and Noble (BKS) has been under pressure for a while.
But with its Nook e-reader losing relevancy fast, the end is nigh.
The brick-and-mortar book business suffers continued decline in the face of Amazon.com (AMZN), and its one-two punch of online sales and e-books via the Kindle — and, of course, the Kindle App on Apple (AAPL) devices and Google (GOOG) Android gadgets, too.
As a result, BKS stock has been battered from highs around $46 in 2006 to lows of around $11 recently. Barnes and Noble hasn’t posted an annual profit since 2011 and has seen just five profitable quarters out of the last 19.
The Nook was the last best hope in the face of e-books, but sales have gotten ugly — with revenue down 34% in the latest quarter and about 17% on the year. Barnes and Noble has resigned itself to no longer making the reader in-house as a result, and CEO William Lynch just announced his resignation.
Microsoft (MSFT) is a minority stakeholder in the Nook business along with education firm Pearson, so it remains unclear what the future holds for the Nook e-reader now that Barnes and Noble has decided to shake things up.
However, with no projected profits through fiscal 2015 according to Standard & Poor’s earnings estimates and with no cash to speak of, it’s not likely the narrative is going to change at B&N anytime soon.
The good news for BKS stock investors, if you’re looking for some, is that Barnes and Noble isn’t going bankrupt. It has almost no long-term debt, and despite the Nook troubles the company has insisted that it will continue “the single-purpose black-and-white e-reader category” even if the Nook color tablet falls by the wayside.
Maybe B&N will find a way out of this hole. But that seems highly unlikely given the deep pockets of competitors. Also, I don’t see consumers opting for a black-and-white reader to supplement their iPad or Kindle Fire tablet when just one device is enough. And I certainly don’t see paper books as a growth business, even as the avid reader of fiction that I am.
Maybe not today and maybe not tomorrow, but soon Barnes and Noble will be pushed out of business. Run screaming from this stock.
- B&N CEO resigns amid Nook mess. (Reuters)
- Will MSFT buy the Nook biz now? (Apple Insider)
- The future is wide open for e-readers. (The Motley Fool)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.