Barnes & Noble, Inc. (NYSE:BKS) Q2 2017 Earnings Conference Call - Final Transcript

Nov 22, 2016 • 10:00 am ET


Barnes & Noble, Inc. (NYSE:BKS) Q2 2017 Earnings Conference Call - Final Transcript


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Good day and welcome to the Barnes & Noble Second Quarter 2017 Earnings Conference Call. [Operator Instructions].

At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Andy Milevoj. Please go ahead, sir.

Andy Milevoj

Good morning, and thanks for joining us on our fiscal 2017 second quarter earnings conference call. With us today are Len Riggio, Allen Lindstrom, and other members of our senior management team. Before we begin, I would like to remind you that this call is covered by the Safe Harbor disclaimer contained in our press release and public documents and is the property of Barnes & Noble. It is not for rebroadcast or use by any other party without the prior written consent of Barnes & Noble.

During this call, we will issue forward-looking-statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release. The company disclaims any obligation to update any forward-looking-statements that may be discussed during this call.

And now, I'll turn the call over to Allen.

Allen Lindstrom

Good morning, today I'll provide an overview of our second quarter financial results. Comparisons are to the prior year quarter unless otherwise noted. During the quarter, total sales decreased $36 million or 4% to $859 million. Retail sales decreased $30 million or 3.5% to $831 million, primarily due to lower comparable store sales and store closures.

Comps declined 3.2% for the quarter as continued lower traffic trends were partially offset by the release of Harry Potter and the Cursed Child. In addition, comps are being pressured by comparisons to the strengths of coloring books last year.

During the quarter, we added inventory and payroll hours back into our stores and conversion rates improved.

We plan to strategically add store payroll hours during the all-important holiday season. Online sales increased 12.5% during the second quarter. We continue to invest in to drive traffic and recently refreshed our site to enhance the customer experience heading into the holiday season.

NOOK sales decreased $8 million or 19% to $35 million for the quarter on lower content and device volumes. Recently, we've launched a new 7-inch NOOK tablet that provides great value for our customers at just $49.

During the quarter, consolidated gross margins decreased $14 million, primarily on the lower sales volume.

From a rate perspective, retail margins declined 70 basis points, primarily on higher promotional activity. Consolidated selling and administrative expenses decreased $36 million to $255 million during the second quarter. NOOK expenses decreased $19 million or 49% on continued cost rationalization efforts and lower variable costs on the sales decline.

Retail expenses declined $17 million or 100 basis points. The prior year quarter included a $10.5 million separation-related severance charge. In Q2 this year, the company recorded a $4.8 million severance charge in connection with its recent CEO departure. This charge was partially