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Wednesday, June 20, 2012

Barnes & Noble's Nook and E-Book Store Are Lagging - Why? Inside the Numbers

Nook device sales declined in part because
of higher third-party retailer returns.

  B&N, the world's largest bookseller, is finding a bumpy road competing in the e-reader and digital book world.

They are still maintaining a 25 to 30 percent U.S. market share, but, they have lost ground compared to a year ago.


Jeffrey A. Tractenberg spells out the reasons and actual analytical numbers in the Wall Street Journal:

Barnes's Nook Seeks Niche

Barnes & Noble Posts Wider Loss for E-Book Division

Nearly three years after Barnes & Noble Inc. opened its e-book store, the retailer continues to report widening losses on its digital business as it competes with larger technology rivals such as Apple Inc. and Amazon.com Inc.

Shedding light on the struggling business—on which it has bet heavily as physical book sales come under continued pressure—Barnes & Noble on Tuesday for the first time broke out results of its Nook digital business. But for some, the results weren't pretty. "Their costs have been greater than expected and they've seen more competition than they expected," said Peter Wahlstrom, an analyst with Morningstar Inc.

For the fiscal fourth quarter ended April 28, Nook revenue—a category that includes the e-reading devices as well as all the digital books sold—fell 11% to $164 million, from $183 million a year earlier.

Barnes & Noble said that it continued to maintain its healthy e-book market share in the U.S. of 25% to 30% during the quarter. But Nook device sales declined in the fourth quarter in part because of higher third-party retailer returns and lower average selling prices. Overall, the digital business reported a loss, before interest, taxes, depreciation and amortization of $77 million for the quarter, widening from the loss of $47 million in the year-earlier quarter.

Although Barnes & Noble earlier projected $1.5 billion in gross digital sales for the full year ended April 28, it reported only $1.3 billion—a $200 million shortfall.

The latest results underscore the difficulty of competing in a consumer marketplace that is highly price sensitive and appears to be embracing color tablets at the expense of simple black-and-white e-readers. Although Barnes & Noble's devices have won critical praise, the bookseller was forced to take back many of its Nook Simple Touch e-readers in the fourth quarter while delaying the launch of its Nook Simple Touch with GlowLight until May for quality purposes. Nooks range in price from $99 to $249.

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