* Riggio backs off February plan to buy chain's bookstores
* Adjusted quarterly loss narrower than expected
* New Nook planned in time for holiday season
* Shares fall 12 percent to $14.72
By Jessica Wohl and Phil Wahba
Aug 20 Barnes & Noble Inc's founder and
largest shareholder on Tuesday suspended his plan to buy the
bookseller's stores, dashing investor hopes for a deal as the
company again reported poor quarterly results.
B&N shares fell 15 percent to $14.17, their lowest level
since February, when Leonard Riggio, who is also chairman, said
he planned to make an offer for B&N's retail business.
News of Riggio's change of heart came as the company
reported a 10 percent decline in sales at its bookstores and
bn.com website for the latest quarter, hurt by a drop in sales
of Nook e-readers and tablets at its stores and the absence of a
mega-bestseller like the "Fifty Shades of Grey" trilogy that
boosted business last year.
A deal would have resulted in splitting stores off from
B&N's Nook and college bookstore businesses.
Now, investors who were waiting for a deal are moving on.
"Right now, the issue is you've got a lot of short-term deal
investors in the stock and there's no deal," said Maxim Group
analyst John Tinker. Investors will now focus on business
fundamentals instead, he said.
And those were weak - comparable sales fell at its college
bookstore chain in the latest quarter, while the Nook unit's
revenue fell 20 percent and Barnes & Noble's share of the U.S.
ebooks market slipped.
Despite another quarter of losses, the company said its cash
position was sound and its $1 billion credit facility nearly
untouched. Its stores generate a lot of cash and are still very
The largest U.S. bookstore chain said it would still
entertain offers for all or part of the company, and Riggio said
he reserved the right to make another bid someday, but the focus
now would be on a more "integrated" company.
"Nothing is taken off the table," B&N President Michael
Huseby told Reuters. "We're at the point now where we're going
to focus on operating the businesses to improve the value of
This includes launching a new website next year with
up-to-date technology to reverse an online sales slide and
compete more forcefully with archrival Amazon.com Inc.
"Every publisher I've talked to fervently wants Barnes &
Noble to retain its viability both at retail and in e-commerce,"
said Lorraine Shanley, co-founder of Market Partners
She said thousands of author readings the retailer hosts
each year help lift book and author profiles.
B&N has said it still plans to close about 15 stores a year
and could easily close more if needed: 442 leases out of 674
superstores are up for renewal within the next three years.
The company put itself up for sale in 2010, but the only
offer came from Liberty Interactive. Liberty backed
down from an initial $1 billion bid and instead bought $204
million of preferred shares convertible for $17 apiece in 2011.
Last year, Microsoft Corp took a 17.6 percent stake
in Nook Media, and British publisher Pearson Plc bought
5 percent. Barnes & Noble owns the rest.
Riggio bought the original Barnes & Noble store in Manhattan
in the 1970s and used it to launch a national chain of big-box
stores. He holds nearly 30 percent of the company's stock.
FIRING ON NO CYLINDERS
The latest quarter was a tumultuous one.
William Lynch resigned as CEO on July 8, soon after the
company announced a 34 percent quarterly revenue drop in its
Nook digital business, a venture he spearheaded that has cost
the company hundreds of millions of dollars. The company on
Tuesday blamed those losses on overly optimistic projections in
the past for the Nook.
Company executives said B&N has a 22 percent share of the
U.S. e-books market, down from 27 percent in February.
B&N said in June it would no longer make new tablets unless
it found a partner. An August Ipsos poll conducted for Reuters
found that only 2 percent of those very or somewhat interested
in purchasing a tablet in the upcoming holiday season were
inclined toward a Nook, with Apple's Inc's iPad,
Amazon's Kindle Fire and the Samsung Galaxy far ahead.
B&N hasn't given up on color and black-and-white e-readers:
The company said on Tuesday it plans to release at least one new
Nook device for the upcoming holiday season and that other
products are in development.
Still, the chain has slashed prices on its Simple Touch
e-readers, suggesting demand for the device was weak.
Sales of B&N's Nook device and e-books plunged 20.2 percent
in the latest quarter, and same-store sales at its college chain
fell 1.2 percent.
B&N reported a net loss of $87 million, or $1.56 per share,
for the fiscal first quarter ended July 27, compared with a loss
of $39.8 million, or 76 cents per share, a year earlier.
An adjusted loss of 86 cents per share, which excludes a
valuation allowance against certain deferred tax assets, was
narrower than the loss of 89 cents per share expected by
analysts, according to Thomson Reuters I/B/E/S.
Revenue fell 8.5 percent to $1.33 billion, slightly better
than the $1.32 billion analysts had expected.
B&N said it still expects retail comparable-store sales to
be down by a high-single-digit percentage in the current fiscal