Barnesandnoble.com LLC reported healthy increases in revenue for this holiday season over last year's, but the online bookseller failed to meet expected goals.
The New York-based bookseller reported a 36% increase in revenue for the fourth quarter, compared with the same period last year, but that revenue was less than anticipated, according to a company statement. Like its rival Amazon.com Inc., which released results yesterday (see story), the online retailer has yet to make a profit.
That and the fact that Amazon had slightly better year-over-year revenue increase, at 40%, may be a cause for concern, said analyst Barrett Ladd at Gomez Advisors Inc. in Waltham, Mass.
The company blamed some of the losses on unexpected costs related to the acquisition of Fatbrain.com, an online bookseller that specializes in technical publications, in November (see story). While the purchase may pose short-term problems, it's part of a bigger investment strategy that may pay off in the long run, Ladd said.
Barnesandnoble touted its upgraded fulfillment structure this year, saying it was "flawless," which is a significant improvement over the woes of online retailers in general last year. The company this week announced a new electronic-publishing service that creates a direct link from author to reader, and gives authors a greater share of the income from their works, while keeping retail prices down.
Those investments in the digital business may be the key to survival, according to Ladd. "They've been doing a bunch of different things that I think will help them in the future."
Barnesandnoble.com is also looking at the college-textbook market, as it has done successfully in its brick-and-mortar stores. A subsidiary of Barnes & Noble, Barnes & Noble College Bookstores Inc., runs 100 college textbook stores across the country.
The parent company, which owns 40% of the online business, also had weaker-than-expected holiday sales it blamed in part on the protracted legal fights over the presidential election. The company said that "sales dropped dramatically the day after the election and remained soft until the issue was resolved."
The online arm will not likely affect the bricks-and-mortar business much, Ladd said, because they are two separate companies.