Barnes & Noble Education(BNED) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for the quarter were $319.7 million, a decrease of$ 17.8 million or 5.3% compared to $337.5 million in the prior year [30] - The consolidated gross margin rate for the quarter was 22.4%, up from 19.7% in the prior year period, primarily due to lower contract costs and a favorable sales mix [33] - Selling and administrative expenses decreased by$ 1.4 million or 1.5% compared to the prior year period [34] - Cash balance at the end of the quarter was $8.2 million, a decrease of$ 5.1 million compared to $13.3 million in the prior year [35] Business Line Data and Key Metrics Changes - Comparable store sales in the retail segment decreased by 3.5% for the quarter, compared to a decrease of 2.5% in the prior year [31] - General merchandise comparable store sales increased by 4.9%, driven by strong school spirit clothing and graduation product sales [32] - Course material sales were down 11% on a comparable basis, impacted by lower enrollments and average selling prices [22] Market Data and Key Metrics Changes - The wholesale segment's net sales were$ 72.3 million, a decrease of 19.6% compared to the prior year, primarily due to a shift in buying patterns and decreased customer demand [32] - DSS sales were $5.4 million, a decrease of 5.3% compared to the prior year, primarily due to lower subscriptions of student brands [32] Company Strategy and Development Direction - The company is investing in the bartleby learn digital study product and expanding its offerings, including the new bartleby write [7][11] - A new BNC Adoption & Insights portal (AIP) has been launched to enhance course material adoptions and drive student success [15] - The company is focusing on enhancing its e-commerce platform and expanding its online product assortment to improve customer experience [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in driving sales during the Fall Rush while maintaining exceptional service [25] - The company expects to recognize results from its investments in digital throughout the year and into fiscal 2021 [26] - Management noted that the current liquidity remains strong despite declining sales trends in physical course materials [36] Other Important Information - The company adopted ASC 842 leases, recording$ 277 million of operating lease right of use assets and $294.7 million of operating lease liability [29] - Capital expenditures for the quarter were$ 8.3 million, slightly up from $8.2 million in the prior year, reflecting continued investment in digital [37] Q&A Session Summary Question: Can you talk about plans for the pricing strategy around bartleby write? - Management indicated that it is too early to tell about bundling opportunities but is focused on understanding student demand [40] Question: What strategies are in place to drive adoption for bartleby during the Fall Rush? - Management is excited about promoting the product with improved training for booksellers and enhanced marketing strategies [42] Question: How is the AIP impacting new store wins and renewals with university partners? - Management noted that course material affordability is a key concern for schools, and AIP provides transparency into savings for students [44] Question: What is the expected timeline for transitioning FirstDay to VitalSource? - Management stated that the transition is already underway and expects it to scale in the next fiscal year without disrupting current users [48] Question: What are the trends seen in summer classes and Fall Rush enrollment? - Management noted that summer course offerings have been slower year-over-year, but they are optimistic about the Fall semester due to new initiatives [60] Question: Can you provide insight into the increase in SG&A costs for the digital business? - Management confirmed that the increase is related to headcount for building out product and marketing competencies, particularly for bartleby [61] Question: Will FirstDay replace price matching communications? - Management clarified that both price matching and inclusive access will be presented as affordable solutions for students [62]