Layoff News Drives Barnes & Noble Shares - Analyst Blog

By Zacks Equity Research,

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As per media reports, bookstore giant, Barnes & Noble, Inc. ( BKS ) is lowering the headcount from its distressed NOOK division to contain costs. Investors reacted positively to the approach, sending the shares up 8.8%

NOOK division handles the company's digital business including digital content, devices and accessories. It was developed to expand Barnes & Nobles' digital business and to enable the company to compete better with behemoths like Amazon Inc. ( AMZN ) and Apple Inc. ( AAPL ).

The company had invested heavily for the development of NOOK and had collaborated with technology giant Microsoft Corporation ( MSFT ). In Apr 2012, the latter invested $300 million for a 17.6% equity stake.

However, at present, the division seems to have failed to deliver as per desired expectations.

NOOK has been in the doldrums for quite some time. The company reported a massive fall of over 60.5% in revenues generated from the division during the holiday season (nine weeks ended Dec 28, 2013). Management blamed the lack of new products and severe competition as the primary reasons. Earlier too, the company had reported a 32.2% year-over-year revenue decline in the division in the second quarter fiscal 2014 (ended Oct 26, 2013).

The layoff is part of the company's efforts to streamline the operations of the division in order to keep itself afloat amid the competitive environment. We believe that Barnes & Noble will not stop with this measure alone. Given the increasing competition from e-Commerce bellwethers, Barnes & Noble has to cut costs aggressively to improve upon its margins. Therefore, we can anticipate many such restructuring initiatives at Barnes & Noble.

Currently, Barnes & Noble carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AAPL , AMZN , BKS , MSFT

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