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Barnes & Noble Education(BNED) - 2021 Q2 - Quarterly Report
BNEDBarnes & Noble Education(BNED)2020-12-08 21:47
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Financial Performance - Total sales for the 13 weeks ended October 31, 2020, were 595,485thousand,adecreaseof22.9595,485 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 7,515thousand,downfrom7,515 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 24,535thousand,adecreaseof67.124,535 thousand, a decrease of 67.1% from 74,544 thousand in the same period of 2019[121]. - Total sales decreased by 176.7million,or22.9176.7 million, or 22.9%, to 595.5 million during the 13 weeks ended October 31, 2020, compared to 772.2millionduringthesameperiodin2019[128].−Totalsalesdecreasedby772.2 million during the same period in 2019[128]. - Total sales decreased by 292.4 million, or 26.8%, to 799.5millionduringthe26weeksendedOctober31,2020,comparedto799.5 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)thousandforthe26weeksendedOctober31,2020,comparedto(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 39,137,000forthe26weeksendedOctober31,2020,comparedtoanetincomeof39,137,000 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,adecreasefrom11,075,000, 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 165.2million,or22.3165.2 million, or 22.3%, to 576.5 million during the 13 weeks ended October 31, 2020, compared to 741.8millionduringthesameperiodin2019[133].−Retailsalesdecreasedby741.8 million during the same period in 2019[133]. - Retail sales decreased by 281.1 million, or 27.7%, to 735.3millionduringthe26weeksendedOctober31,2020,comparedto735.3 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,withagrossprofitof576,514,000, 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 43,653thousand,comparedto43,653 thousand, compared to 53,685 thousand in the same period of 2019, reflecting a decrease of 18.7%[125]. - Wholesale sales decreased by 3.8million,or9.53.8 million, or 9.5%, to 36.4 million during the 13 weeks ended October 31, 2020, compared to 40.2millioninthesameperiodin2019[138].−DSStotalsalesincreasedby40.2 million in the same period in 2019[138]. - DSS total sales increased by 0.7 million, or 14.0%, to 5.9millionduringthe13weeksendedOctober31,2020,from5.9 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 21.4million,or18.921.4 million, or 18.9%, to 92.0 million for the 13 weeks ended October 31, 2020, compared to 113.4millionforthesameperiodin2019[151].−Retailsegmentsellingandadministrativeexpensesdecreasedby113.4 million for the same period in 2019[151]. - Retail segment selling and administrative expenses decreased by 21.2 million, or 21.5%, to 77.4millionforthe13weeksendedOctober31,2020,primarilyduetoa77.4 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 480,200thousand,anincreasefrom480,200 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 330,800andrepaid330,800 and repaid 406,000 under the Credit Agreement during the 26 weeks ended October 31, 2020, with 99,500ofoutstandingborrowingsasofthatdate[81].−Thecompanyissued99,500 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 99.5millioninoutstandingborrowingsunderthecreditfacility,havingborrowed99.5 million in outstanding borrowings under the credit facility, having borrowed 330.8 million and repaid 406.0millionduringthe26weeks[188].−Thecompanyoperatesunderacreditagreementwithatotalcommittedprincipalamountof406.0 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 100million[188].ImpactofCOVID−19−ThecompanyexperiencedsignificantimpactsfromCOVID−19,leadingtotheclosureofmostphysicalcampusstoresandashifttoonlineservices[2].−Fiscal2021secondquarterresultswereadverselyaffectedbyongoingpandemic−relatedadjustmentsinlearningmodels,withfewerstudentsreturningtocampus[3].−EnrollmenttrendsarenegativelyimpactedbyCOVID−19,withasignificantreductioninU.S.economicactivityandincreasedunemploymentpotentiallyleadingtodecreasedenrollment[7].−TheongoingCOVID−19pandemicsignificantlyimpactedthecompany′soperations,withfewerstudentsreturningtocampusandoverallenrollmentdeclinesaffectingsales[180].−Thecompanyhastemporarilysuspendedemployermatchingcontributionsintoits401(k)plansthroughtheendofDecember2020duetoCOVID−19relatedimpacts[85].StrategicInitiatives−Thecompanyisfocusedonexpandinge−commercecapabilitiesandstrategicpartnershipstoenhancevalueforshareholders[8].−Thecompanyanticipatescontinuedgrowthingeneralmerchandisesalesasproductassortmentsevolvewithconsumertrends[6].−Thecompanyexpectsnewbookstorecontractstodrivefuturegrowth,whilealsoanticipatingpotentialclosuresoflessprofitablelocations[10].−Thecompanymadecontinuedprogressinthedevelopmentofitsnextgeneratione−commerceplatform,whichlaunchedinFiscal2021[136].−Thecompanyimplementedasignificantcostreductionprogramaimedatmaximizingproductivityanddrivingprofitability,withexpectedannualizedsavingsbeginninginFiscal2021[180].TaxandLiabilities−Thecompanyrecordedanincometaxbenefitof100 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)duringthe26weeksendedOctober31,2020,resultinginaneffectiveincometaxrateof29.8(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 25.7millionrelatedtolong−termtaxpayableassociatedwiththeLIFOreserve,with25.7 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].