Barnes & Noble Education(BNED)2020-12-08 21:47Financial Performance - Total sales for the 13 weeks ended October 31, 2020, were $595,485 thousand, a decrease of 22.9% compared to $772,228 thousand for the same period in 2019[121]. - Net income for the 13 weeks ended October 31, 2020, was $7,515 thousand, down from $35,931 thousand in the prior year, representing a decline of 79.1%[121]. - Adjusted EBITDA for the 13 weeks ended October 31, 2020, was $24,535 thousand, a decrease of 67.1% from $74,544 thousand in the same period of 2019[121]. - Total sales decreased by $176.7 million, or 22.9%, to $595.5 million during the 13 weeks ended October 31, 2020, compared to $772.2 million during the same period in 2019[128]. - Total sales decreased by $292.4 million, or 26.8%, to $799.5 million during the 26 weeks ended October 31, 2020, compared to $1,091.9 million during the same period in 2019[130]. - The company experienced a significant decline in adjusted earnings, reporting $(30,641) thousand for the 26 weeks ended October 31, 2020, compared to $7,759 thousand in the same period of 2019[121]. - The company reported a net income loss of $39,137,000 for the 26 weeks ended October 31, 2020, compared to a net income of $3,776,000 for the same period in 2019[171]. - The adjusted earnings (non-GAAP) for the 13 weeks ended October 31, 2020, were $11,075,000, a decrease from $37,834,000 in the prior year, representing a decline of approximately 70.7%[171]. Sales and Revenue Breakdown - Retail sales decreased by $165.2 million, or 22.3%, to $576.5 million during the 13 weeks ended October 31, 2020, compared to $741.8 million during the same period in 2019[133]. - Retail sales decreased by $281.1 million, or 27.7%, to $735.3 million during the 26 weeks ended October 31, 2020, compared to $1,016.4 million during the same period in 2019[133]. - Total sales for the Retail segment were $576,514,000, with a gross profit of $95,704,000, resulting in a gross margin of approximately 16.6%[176]. - Rental income for the 13 weeks ended October 31, 2020, was $43,653 thousand, compared to $53,685 thousand in the same period of 2019, reflecting a decrease of 18.7%[125]. - Wholesale sales decreased by $3.8 million, or 9.5%, to $36.4 million during the 13 weeks ended October 31, 2020, compared to $40.2 million in the same period in 2019[138]. - DSS total sales increased by $0.7 million, or 14.0%, to $5.9 million during the 13 weeks ended October 31, 2020, from $5.2 million in the prior year[139]. Cost and Expenses - Gross margin for the 13 weeks ended October 31, 2020, was 19.4%, down from 24.2% in the prior year, indicating a decline of 4.8 percentage points[122]. - Selling and administrative expenses as a percentage of total sales increased to 15.4% for the 13 weeks ended October 31, 2020, compared to 14.7% in the same period of 2019[122]. - Total Selling and Administrative Expenses decreased by $21.4 million, or 18.9%, to $92.0 million for the 13 weeks ended October 31, 2020, compared to $113.4 million for the same period in 2019[151]. - Retail segment selling and administrative expenses decreased by $21.2 million, or 21.5%, to $77.4 million for the 13 weeks ended October 31, 2020, primarily due to a $17.5 million decrease in stores payroll and operating expenses[152]. - Total cost of sales for the 13 weeks ended October 31, 2020, was $480,200 thousand, an increase from $585,278 thousand in the same period of 2019[125]. - Cost of sales as a percentage of sales increased to 80.6% during the 13 weeks ended October 31, 2020, compared to 75.8% during the same period in 2019[140]. Debt and Financing - The company borrowed $330,800 and repaid $406,000 under the Credit Agreement during the 26 weeks ended October 31, 2020, with $99,500 of outstanding borrowings as of that date[81]. - The company issued $4,759 in letters of credit under the Credit Facility as of October 31, 2020[81]. - As of October 31, 2020, the company had $99.5 million in outstanding borrowings under the credit facility, having borrowed $330.8 million and repaid $406.0 million during the 26 weeks[188]. - The company operates under a credit agreement with a total committed principal amount of $400 million, with an option to request an increase of up to $100 million[188]. Impact of COVID-19 - The company experienced significant impacts from COVID-19, leading to the closure of most physical campus stores and a shift to online services[2]. - Fiscal 2021 second quarter results were adversely affected by ongoing pandemic-related adjustments in learning models, with fewer students returning to campus[3]. - Enrollment trends are negatively impacted by COVID-19, with a significant reduction in U.S. economic activity and increased unemployment potentially leading to decreased enrollment[7]. - The ongoing COVID-19 pandemic significantly impacted the company's operations, with fewer students returning to campus and overall enrollment declines affecting sales[180]. - The company has temporarily suspended employer matching contributions into its 401(k) plans through the end of December 2020 due to COVID-19 related impacts[85]. Strategic Initiatives - The company is focused on expanding e-commerce capabilities and strategic partnerships to enhance value for shareholders[8]. - The company anticipates continued growth in general merchandise sales as product assortments evolve with consumer trends[6]. - The company expects new bookstore contracts to drive future growth, while also anticipating potential closures of less profitable locations[10]. - The company made continued progress in the development of its next generation e-commerce platform, which launched in Fiscal 2021[136]. - The company implemented a significant cost reduction program aimed at maximizing productivity and driving profitability, with expected annualized savings beginning in Fiscal 2021[180]. Tax and Liabilities - The company recorded an income tax benefit of $(16,610) on a pre-tax loss of $(55,747) during the 26 weeks ended October 31, 2020, resulting in an effective income tax rate of 29.8%[90]. - The company recorded a liability of $224 for cash-settled phantom share unit awards as of October 31, 2020[88]. - As of October 31, 2020, other long-term liabilities included $25.7 million related to long-term tax payable associated with the LIFO reserve, with $7.6 million becoming currently payable due to inventory level declines[189]. Operational Metrics - The company opened 80 new stores and closed 60 stores during the 26 weeks ended October 31, 2020, ending the period with a total of 1,439 stores[133]. - Barnes & Noble Education operates 1,439 bookstores, including 768 physical and 671 virtual locations, serving over 6 million students[1]. - The company has approximately $26.7 million remaining available under its stock repurchase program, with no shares repurchased under the program during the 26 weeks ended October 31, 2020[190].