Barnes & Noble, Inc. (NYSE:BKS) Q2 2018 Earnings Conference Call Transcript

Nov 30, 2017 • 10:00 am ET

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Barnes & Noble, Inc. (NYSE:BKS) Q2 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to this Barnes & Noble Fiscal 2018 Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to the VP of IR, Mr. Andy Milevoj. Please go ahead, sir.

Executive
Andy Milevoj

Good morning, and thanks for joining us on our fiscal 2018 second quarter earnings conference call. With us today are Demos Parneros, Allen Lindstrom and other members of our senior management team. (Forward-Looking Cautionary Statements) And now I'll turn the call over to Demos.

Executive
Demos Parneros

Thanks, Andy, and good morning, everyone. Today, I'll provide an overview of our second quarter results and discuss some encouraging trends and initiatives that we expect to benefit us in the back half of the year. Our second quarter EBITDA loss was $25 million, primarily driven by our 6.3% comp store sales decline and higher clearance, which I'll discuss in just a moment. Approximately half of the comp sales decline was due to comparisons to the Harry Potter release a year ago. And as we look at the different components of our business, we continue to be encouraged by the improving sales trends in our book business.

However, sales trends in non-book categories, especially in gift, continued to weigh on our comp sales trends. To improve our performance in our gift and toys and games businesses, we began to reduce our over-assortment of slower-moving, non-returnable merchandise. This decision is part of our broader strategy to grow sales and become more productive by featuring a narrower product assortment with higher turnover. Going forward, we will place a greater emphasis on books while further narrowing our non-book assortment.

Another area where we see opportunity is cafe. Historically, cafe sales have followed the overall traffic trends in our stores. During the quarter, we began testing bounce-back offers on our receipts, directing customers who made purchases to the cafe for a discounted coffee or a buy one get one offer. As a result of this initiative, for the first time in over a year, our cafe comps were slightly positive in the last month of the quarter.

While traffic remains an issue, we are doubling down on our efforts to improve in-store conversion. Through customer research, we discovered that customers come to Barnes & Noble not only to browse and discover but also to interact with our book sellers. This is a big takeaway for our store managers from a recent conference. We encourage our book sellers to be more proactive with customers and actively engage with them. As a result, we saw immediate improvements in our conversion rate following the conference, with the year-over-year conversion improving 2.7% for the quarter. We also believe this has contributed to the 1.5% increase in comp book sales during the back half of the quarter.

Additionally, we're encouraged by some of the tests that are currently underway in our test and learn pipeline. We are seeing positive traction in our membership tests that are focused on