Barnes & Noble Education(BNED) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for Q3 2022 were $402.8 million, a decrease of$8.8 million or 2.1% compared to $411.6 million in the prior year [35] - Retail sales decreased by$12.9 million or 3.3% due to lower course material sales and lower logo and emblematic revenue recognition [35] - Gross comparable store sales increased by 8.4%, with a 59.1% increase in general merchandise sales [36] Business Line Data and Key Metrics Changes - Retail segment sales decreased by $12.9 million, while DSS segment sales grew by$2.2 million or 30.9% to $9.4 million [35][39] - First Day Complete and First Day rental course materials revenue increased by 64$76.1 million compared to $46.4 million in the prior year [36] - General merchandise comparable sales grew by 59$2.4 million or 6.1% to $37 million, primarily due to COVID-19 related supply constraints [38] - The overall gross margin rate for the quarter was 21.6$87 million [39] Company Strategy and Development Direction - The company is focused on enhancing its digital offerings and partnerships, particularly with First Day Complete and Bartleby, to meet the evolving needs of students and institutions [16][18] - The strategic partnership with Fanatics and Lids is expected to drive growth in general merchandise sales and improve operational efficiencies [22][24] - The company aims to adapt to a more flexible, student-centric model in higher education, addressing broader student needs beyond academics [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing COVID-related challenges but expressed optimism about returning to a more normal operating environment [31] - The company expects positive comps from the return of in-person events and activities, which should benefit sales [32] - Management indicated that while fiscal 2023 non-GAAP adjusted EBITDA is expected to improve, it will likely remain below pre-COVID levels due to inflationary pressures and supply chain issues [43] Other Important Information - The company plans to provide more specifics on expected enrollment growth for First Day Complete in connection with the year-end earnings release in June [18] - The partnership with Billie Jean King Enterprises aims to enhance diversity, equity, and inclusion initiatives within the company [30] Q&A Session Summary Question: What uplift is seen from the Fanatics Lids partnership? - Management noted a 59% increase in comp store general merchandise sales, attributing it to improved in-store assortment and online benefits [44][46] Question: Why might margin accretive businesses not translate to profitability? - Management highlighted concerns about inflation affecting costs and the need to remain competitive in a digital environment [50][52] Question: How is the Delgado partnership expected to scale? - The partnership is focused on providing personalized support to students, with a scalable framework being developed for future implementations [82] Question: What is the impact of revenue deferrals on Q3 results? - Approximately $25 million of revenue was deferred to the fourth quarter due to delayed school openings [75]