TGT Target Corp

By Jeffrey A. Trachtenberg 

Barnes & Noble Inc. reported a disappointing holiday quarter and provided a downbeat prognosis for the fiscal year that ends in April as consumers spent less time shopping in its stores and more time making their purchases online.

The issue of declining store traffic has affected other leading retailers. Earlier this week, Target Corp. reported lower sales and profits for its holiday quarter and said its 2017 profit would be significantly lower than previously expected.

Barnes & Noble reported sales of $1.3 billion in the quarter that ended Jan. 28, down 8% from a year earlier. Profit fell 12% to $70.3 million, or 96 cents a share, from $80.3 million, or $1.04 a share. Analysts had projected earnings of $1.13 a share on $1.28 billion in revenue.

Barnes & Noble shares fell 8.6% to $9.05 on the New York Stock Exchange on Thursday.

During an investor call, Chief Executive Leonard Riggio said Demos Parneros, who was named chief operating officer in November, is a leading candidate to succeed him. Mr. Riggio, 76 years old, returned as CEO in 2016 instead of retiring. He didn't offer investors any insight into how long he intends to remain in his post.

Same-store sales fell 8.3% in the fiscal third quarter, largely due to lower traffic and a decline in sales of coloring books and artist supplies. There was also a tough comparison to last year when a new album from singer Adele sold briskly. Those items accounted for nearly one-third of the sales decline.

"We are witnessing a major shift in the way retail works and the type of stores that need to be opened," said Mr. Riggio, who noted that book subjects aren't appearing as much on evening news programs or morning news and entertainment shows. "All the talk now is politics."

Barnes & Noble, which has closed a number of stores in recent years, has now opened three test stores designed to make it easier for consumers to find the titles they want. All three offer full-service restaurants. It is unclear whether the final prototype will have such a restaurant, Mr. Riggio said in an interview.

Barnes & Noble now expects comparable-store sales will decline about 7% for the full fiscal year and consolidated earnings before interest, taxes, depreciation and amortization will be between $180 million and $190 million. In early January, the retailer forecast full-year Ebitda would be around $200 million while comparable-store sales would decline approximately 6%.

"Retail is soft in general," said John Tinker, an analyst with Gabelli & Co. "The big issue is that there is less foot traffic."

Barnes & Noble ended its fiscal third quarter with $18.2 million in long-term debt compared with no long-term debt a year earlier. The retailer returned $14.4 million to shareholders during the quarter in the form of dividends and share repurchases.

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Anne Steele contributed to this article.

Write to Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com

(END) Dow Jones Newswires

March 03, 2017 02:47 ET (07:47 GMT)

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