Boston, MA 04/21/2014 (wallstreetpr) – Barnes & Noble, Inc. (NYSE:BKS)’s shares were down by 12% and closed at $16.37 as the Company’s Chairman Leonard Riggio sold 3.7 million of common shares. Riggio considered the initiatives to strengthen financial position in the long-term. The Chairman remains the major (~20%) stake holder in the Company.
Why
The Company experiences liquidity constraint due to poor inventory movement of NOOK devices that result in huge losses. The incurring losses and decreased sale of NOOK devices continue to affect the overall business and create lower operating margin for the Company.
During 3Q2014 ended in January 25, 2014, total revenues were also down by 10.3% to $2.0 billion due to a significant fall in NOOK sales along with Retail and College business. But, the Company’s stringent measures to lower inventory related charges against NOOK devices improved the total operating profit to $173 million, compared to $59 million same period last year.
Impacts over initiatives
Riggio’s initiative to sell stock will improve balance sheet position that help to reduce excess liquidity resulted from poor progress of devices inventory. In addition, Liberty Media, another major stakeholder to Barnes & Noble, Inc. (NYSE:BKS), sold the majority of its shares to institutional buyers except its initial investment of ~10%. Consequently, Liberty Media reduced its ownership and given full authority and flexibility to B&N to control the entire business. Therefore, the Company expects to put more funds into the business to improve liquidity and generate growth in operating margin.
Going ahead
B&N continues to strengthen its financial position by generating cash from its operation and funds under available credits. The Company increased its cash balance to $490 million as of January 25, 2014, due to liquidation of NOOK’s inventory, Retail and College’s profits and proceeds from commercial agreement with Microsoft.
Barnes & Noble, Inc. (NYSE:BKS) expects benefits from comparable store sales and anticipates growth in high margin textbook rental business. The conversion of device inventory into cash will further reduce the losses incurred from NOOK’s business going forward.
