Barnes Noble Reports Record NOOK Sales

Barnes Noble, Inc. (NYSE: BKS), the leading retailer of
content, digital media and educational products, today reported
record holiday sales for its NOOK business, including devices and
digital content. During the nine-week holiday period ending
December 31, 2011, NOOK unit sales, including NOOK Simple Touch,
NOOK Color and the new NOOK Tablet, increased 70% over the same
period last year. Sales of NOOK Tablet exceeded expectations, while
sales of NOOK Simple Touch lagged expectations, indicating a
stronger customer preference for color devices. Digital content
sales also grew briskly during the same nine-week period,
increasing 113% on a comparable basis. Content sales are defined to
include digital books, digital newsstand, and the rapidly growing
apps business. The entire line of NOOK products have been acclaimed
widely as the best in the marketplace, and validate the Companys
first-class digital organization. While the Company has invested
heavily in developing its new platform, including recruiting
world-class talent and increasing its advertising and marketing
spend, its customer Life-Time-Value (LTV) models continue to
indicate these up-front investments will create significant value.
The Company expects fiscal 2012 digital content sales to be
approximately $450 million. By fiscal 2012 year-end, based upon
forecasted device sales, the Company expects annualized U.S.
digital content sales will achieve a run-rate of approximately
$700-$750 million. Due to the increased significance of the NOOK
business platform, the Company is evaluating its reporting
segments. The evaluation is expected to be complete by the end of
this fiscal year, which may result in reporting NOOK as a separate
operating segment. STRATEGIC EXPLORATION OF NOOK DIGITAL BUSINESS
In order to capitalize on the rapid growth of the NOOK digital
business, and its favorable leadership position in the expanding
market for digital content, the Company has decided to pursue
strategic exploratory work to separate the NOOK business. We see
substantial value in what weve built with our NOOK business in only
two years, and we believe its the right time to investigate our
options to unlock that value, said William Lynch, Chief Executive
Officer of Barnes Noble. In NOOK, weve established one of the
worlds best retail platforms for the sale of digital copyright
content. We have a large and growing installed base of millions of
satisfied customers buying digital content from us, and we have a
NOOK business thats growing rapidly year-over-year and should be
approximately $1.5 billion in comparable sales this fiscal year.
Between continued projected growth in the U.S., and the opportunity
for NOOK internationally in the next 12 months, we expect the
business to continue to scale rapidly for the foreseeable future.
The Company also said that it is in discussions with strategic
partners including publishers, retailers, and technology companies
in international markets that may lead to expansion of the NOOK
business abroad. There can be no assurance that the review of a
potential separation of the NOOK digital business will result in a
separation. There is no timetable for the review, and the Company
does not intend to comment further regarding the review, unless and
until a decision is made. RETAIL HOLIDAY SALES RESULTS During the
nine-week holiday period, Barnes Noble store (or Retail) sales
increased 2.5% over the prior year period to $1.2 billion.
Comparable store sales increased 3.4%, on top of a 9.7% increase
last year. Retail core comparable store sales, defined as the sales
of non-digital merchandise, increased 4.5% over last year. Book
sales were strong overall, fueled by strength across multiple
categories. Juvenile titles were exceptionally strong, led by The
Hunger Games, Cabin Fever (Diary of a Wimpy Kid Series #6),
Inheritance, and The LEGO Ideas Book. In addition, there was
significant crossover between physical and digital book sales,
including big movie books like The Help, The Girl With the Dragon
Tattoo and War Horse among the holiday hits. Physical book sales on
a comparable basis increased by 4% at Barnes Noble stores,
exhibiting growth for the first time in five years. The Companys
continued emphasis on Toys Games led to 30% growth in that area, on
top of a 48% increase last year. Top sellers included LEGO building
sets, Harry Potter collectibles and games, Angry Birds games and
electronic learning tablets such as LeapFrog LeapPad Explorer and
Vtech Innotab Tablet. Barnes Noble continues to benefit from a
consolidating physical book market. The Company benefited from the
closure of Borders stores during the holiday season and now expects
the sales lift to be in a range of $200 million to $230 million in
fiscal 2012. The Company reinvested the Borders upside in its
digital business. BN.COM/NOOK HOLIDAY SALES RESULTS BN.com sales
increased 43% over the prior year period to $327 million, with
comparable sales increasing 52%, on top of a 78% increase a year
ago. This increase was driven by continued growth of the NOOK
business, offset by a decline in online physical product sales. The
consolidated NOOK business across all of the Companys segments,
including sales of digital content, device hardware and related
accessories, increased 43% during the holiday period to $448
million, on a comparable sales basis. A substantial portion of the
70% year-over-year NOOK unit increase was driven by sell-through at
third-party retailers as the Company expanded NOOK distribution.
This growth in sales with customers at retailers outside of Barnes
Noble stores is indicative of the increasing awareness of the NOOK
brand and demand for the product from customers new to Barnes
Noble. BN.com and NOOK comparable sales reflect the actual selling
price for eBooks sold under the agency model rather than solely the
commission received. Additionally, it includes all deferred eReader
device revenues, and includes device sales to channel partners on a
sell-in basis net of estimated returns. UPDATED GUIDANCE The
Company now expects full fiscal year 2012 consolidated sales
between $7.0 billion and $7.2 billion. Comparable sales at Barnes
Noble stores are expected to increase 1%, Barnes Noble College
sales are expected to be flat, and sales are expected to increase
40% to 50% at BN.com. The Company now expects full year earnings
before interest, taxes, depreciation and amortization (EBITDA) to
be in a range of $150 to $180 million. The change in guidance is
due primarily to a shortfall in the expected sales of NOOK Simple
Touch, as well as additional investments in growing the NOOK
business, such as advertising to support new products and
international expansion in the back half of the year. The Company
now expects full year losses per share to be in a range of $1.40 to
$1.10. Although Barnes Noble was the first to the market with a
revolutionary color eReader and has since introduced NOOK Tablet,
which has exceeded expectations, the Company over-anticipated the
growth in consumer demand for single purpose black-and-white
reading devices this holiday. Nevertheless, NOOK Simple Touch saw
strong sales this holiday, remains the highest rated eReader in the
market, and the Company plans to continue to market this successful
product for years to come. Barnes Noble, Inc. will report third
quarter earnings results on or about February 21, 2012.
FORWARD-LOOKING STATEMENTS This press release contains certain
forward-looking statements (within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended) and information
relating to Barnes Noble that are based on the beliefs of the
management of Barnes Noble as well as assumptions made by and
information currently available to the management of Barnes Noble.
When used in this communication, the words "anticipate," "believe,"
"estimate," "expect," "intend," "plan," "will" and similar
expressions, as they relate to Barnes Noble or the management of
Barnes Noble, identify forward-looking statements. Such statements
reflect the current views of Barnes Noble with respect to future
events, the outcome of which is subject to certain risks,
including, among others, the general economic environment and
consumer spending patterns, decreased consumer demand for Barnes
Noble's products, low growth or declining sales and net income due
to various factors, risk that international expansion will not be
successfully achieved or may be achieved later than expected,
possible disruptions in Barnes Noble's computer systems, telephone
systems or supply chain, possible risks associated with data
privacy, information security and intellectual property, possible
work stoppages or increases in labor costs, possible increases in
shipping rates or interruptions in shipping service, effects of
competition, possible risks that inventory in channels of
distribution may be larger than able to be sold, possible risk that
returns from consumers or channels of distribution may be greater
than estimated, the risk that the expected sales lift from Borders
store closures is not achieved in whole or part, the risk that
digital sales growth is less than expectations and the risk that it
does not exceed the rate of investment spend,
higher-than-anticipated store closing or relocation costs, higher
interest rates, the performance of Barnes Noble's online, digital
and other initiatives, the performance and successful integration
of acquired businesses, the success of Barnes Noble's strategic
investments, unanticipated increases in merchandise, component or
occupancy costs, unanticipated adverse litigation results or
effects, product and component shortages, the potential adverse
impact on the business resulting from the review of a potential
separation of the digital business, the possibility that no digital
business separation transaction may occur or the form or nature of
any related transaction, the impact on the retail business of any
separation of the digital business, the costs and disruptions
arising out of a separation of the digital business, the risk that
Barnes Noble may not recoup its investments in the digital business
as part of any separation of the digital business and other factors
which may be outside of Barnes Noble's control, including those
factors discussed in detail in Item 1A, "Risk Factors," in Barnes
Noble's Annual Report on Form 10-K and Form 10-K/A, and in Barnes
Noble's other filings made hereafter from time to time with the
SEC. Our forward looking statements relating to international
expansion are also subject to the following risks, among others
that may affect the introduction, success and timing of the NOOK
e-reader and content in countries outside the United States: we may
not be successful in reaching agreements with international
companies, the terms of agreements that we reach may not be
advantageous to us, our NOOK device may require technological
changes to comply with applicable laws, and marketplace acceptance
and other companies have already entered the marketplace with
products that have achieved some customer acceptance. Should one or
more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes
may vary materially from those described as anticipated, believed,
estimated, expected, intended or planned. Subsequent written and
oral forward-looking statements attributable to Barnes Noble or
persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph. Barnes
Noble undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date of this communication.
This press release does not constitute an offer to sell, or a
solicitation of an offer to purchase securities. ABOUT BARNES
NOBLE, INC. Barnes Noble, Inc. (NYSE:BKS), the world's largest
bookseller and a Fortune 500 company, operates 703 bookstores in 50
states. Barnes Noble College Booksellers, LLC, a wholly-owned
subsidiary of Barnes Noble, also operates 637 college bookstores
serving over 4.6 million students and faculty members at colleges
and universities across the United States. Barnes Noble conducts
its online business through BN.com (www.bn.com), one of the Web's
largest e-commerce sites, which also features more than two million
titles in its NOOK Bookstore (www.bn.com/ebooks). Through Barnes
Nobles NOOK eReading product offering, customers can buy and read
digital books and content on the widest range of platforms,
including NOOK devices, partner company products, and the most
popular mobile and computing devices using free NOOK software.
General information on Barnes Noble, Inc. can be obtained via the
Internet by visiting the company's corporate website:
www.barnesandnobleinc.com. NOOK, NOOK Tablet, NOOK Simple Touch ,
NOOK 1st Edition, NOOK 1st Edition Wi-Fi, NOOK Color, Readers
Tablet, PagePerfect, Best-Text, Fast Page, NOOK Books, NOOK Store,
NOOK Bookstore, NOOK Newsstand, NOOK Magazines, VividView,
ArticleView, NOOK Newspapers, NOOK Comics, NOOK Cloud, NOOK Apps,
FREE NOOK Reading Apps, PubIt!, NOOK Discover, NOOK Kids, Read and
Play, Read to Me, Read and Record, NOOK Digital Shop, Read In
Store, More In Store, NOOK Friends, LendMe, NOOK Library, NOOK
Boutiques, The Barnes Noble Promise, NOOK Books en español, NOOK
Study, Free Friday, Lifetime Library and Read What You Love.
Anywhere You Like are trademarks of Barnes Noble, Inc. Other
trademarks referenced in this release are the property of their
respective owners. Follow Barnes Noble on Twitter
(www.bn.com/twitter), Facebook (www.facebook.com/barnesandnoble)
and YouTube (www.youtube.com/user/bnstudio).