Barnes & Noble: Caught between e-book tipping point, tablet wars

How does the Nook stand out in that crowd? It's not easy. Meanwhile, Barnes & Noble relies on its struggling retail stores to showcase the Nook.

Barnes & Noble announced disappointing same store sales for December as Nook revenue fell 12.6 percent from a year ago. The bookstore chain now appears to be caught in a vice. On one side, there's a digital book tipping point hurting print sales. On the other is the reality that Nook has a tough time standing out in a crowded tablet field.


In a statement, William Lynch, CEO of Barnes & Noble, said:

"We entered the holiday with two great new products, NOOK HD and Nook HD+, both highly rated media tablets of phenomenal quality. Nook device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday. We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward."

I'll save Mr. Lynch some time. Here's what happened to Nook sales:

  1. The Kindle Fire happened.
  2. The iPad happened.
  3. The iPad mini happened. 
  4. An army of Android tablets happened.

How does the Nook stand out in that crowd? It's not easy. Meanwhile, Barnes & Noble relies on its retail stores to showcase the Nook. The problem: Core same store sales at brick and mortar stores fell 3.1 percent from a year ago.

In other words, Barnes & Noble is seeing lower store traffic and that's hampering its ability to plug the Nook.

Overall, Barnes & Noble expects fiscal 2013 Nook revenue of $3 billion.

Stifel Nicolaus analyst David Schick said:

Barnes & Noble pre-announced holiday sales would be weak, but the significance of the deceleration calls into question whether a tipping point in digital is happening - both in charge and impact to brick and mortar book sales. This has always been a potential concern, but evidence is beginning to mount – success of the iPad mini likely pressured sales of Nook tablets, and the Kindle Paperwhite was the clear favorite e-ink reader among critics and reviewers this holiday (beating out the Nook GlowLight and SimpleTouch).

Barclays analyst Alan Rifkin estimates that Nook's three-year cumulative loss will be roughly $729 million. Barnes & Noble is depending on additional distribution through its Microsoft partnership, but Nook's ongoing success is uncertain. Barnes & Noble appears to be in an odd position where e-book sales are hurting its core business and potentially its digital one too.


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