Barnes & Noble Beats Estimates, Looks Poised To Grow

Sat., March 14, 1998

From Wire Reports

Barnes & Noble Inc. said its fiscal fourth-quarter earnings rose 13 percent, reflecting strong sales of books during the holiday season and lower costs.

The world’s largest bookseller said profit before a charge rose to $69.8 million, or 98 cents a diluted share, from net income of $62 million, or 91 cents, a year ago.

Barnes & Noble was expected to earn 96 cents a share, the average estimate of analysts surveyed by IBES International Inc.

The earnings were driven largely by a 10 percent gain in holiday same-store sales at Barnes & Noble book and music stores. Also, a new distribution center the retailer opened last year lets it buy more books directly from publishers, cut out wholesalers and keep more of the profits. Barnes & Noble’s gross margin - or the percentage of revenue left after subtracting the cost of goods sold - widened to 38 percent from 37 percent.

Shares of the New York-based company closed Friday at $38, up $0.25.

Including a charge of $11.5 million, or 17 cents a diluted share, for the early retirement of debt, net income in the recent quarter was $58.3 million, or 81 cents a share.

Revenue for the quarter ended Jan. 31 rose 10 percent to $968.5 million from $882.5 million. The recent quarter included 13 weeks, while the year-ago quarter had 14 weeks.

U.S. companies now report per-share earnings two ways: diluted, which includes stock options, warrants and other convertible securities, and basic, which doesn’t include them. Barnes & Noble’s basic per-share profit from operations was $1.03, and net income was 86 cents.

Barnes & Noble’s Internet site, BarnesandNoble.com, generated revenue of $14.6 million in fiscal 1997, though the launch of the site last June produced a loss of $9 million, or 13 cents a diluted share, for the year. Analysts said they expect revenue from BarnesandNoble.com to reach $100 million in the current fiscal year, though they don’t see any profit from the site until fiscal 1999.

Rival Borders Group Inc. has delayed the launch of its own Internet site, Borders.com, which analysts said they expect will help Barnes & Noble’s site. Borders earlier this week said it expects to launch its site sometime in the next two months.

Some stocks that moved substantially or traded heavily Friday:

NYSE

Kimberly-Clark, down 6-7/16 at 50-11/16.

The maker of Kleenex tissues and Huggies diapers said late Thursday its first-quarter earnings will fall as much as 14 percent below analysts’ expectations. The Dallas-based company blamed heavy competition in Europe and the cost of introducing new products there.

Nine West, down 1-13/16 at 24-1/2.

The women’s footwear maker expects to break even or post a small profit in the quarter ended Jan. 1, not counting a charge for previously announced job cuts. Analysts had expected the company, based in White Plains, N.Y., to earn about $18.7 million.

Hilton Hotels, up 1-13/16 at 34-13/16.

Circus Circus, up 9/16 at 25-3/4.

Hilton confirmed it is considering dividing its hotel and gambling businesses and having the resulting casino company buy Circus Circus. Reports of a possible deal between Hilton and Las Vegas-based Circus Circus have been circulating for days. Hilton is based in Beverly Hills, Calif.

NASDAQ

Urologix, down 3-1/16 at 9-1/2.

The Minneapolis-based maker of equipment to treat urological diseases cut its sales estimate for the current quarter. It blamed an electronic problem with its Targis System, which uses microwave heat to reduce enlarged prostate glands.

Nextel, up 1-7/16 at 29-7/16.

Merrill Lynch raised its rating on the wireless communications company to “buy” from “accumulate,” Dow Jones News Service reported. Nextel is based in McLean, Va.

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