Barnes & Noble 2008 Annual Report |
| June 08 2009 | |
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BARNES & NOBLE 2008 LETTER TO SHAREHOLDERS Dear Shareholder: Fortunately, for Barnes & Noble, we did read the tea leaves early in the year, and did begin to take measures well before the crisis became national news. Accordingly, we reduced inventory levels, overhead and operating expenses, and eff ectively ceased negotiations for new stores. Later in the year, when the recession began taking a tighter grip on the economy, we made minor adjustments to our already scaled back forecasts. As a result, we came out of one of the nation’s deepest economic downturns in a very solid position, achieving $150 million in operating cash flow, and maintaining our $52 million dividend to shareholders. At year end, we had no debt on our balance sheet and $282 million cash on hand. Even as our comparable sales declined 5.4 percent for the year, our management team again executed our business plan flawlessly, managing store payroll and store expenses in line with diminished sales, while providing world class customer service. As well, continued improvement of our supply chain system enabled us to reduce inventories while maintaining the same levels of in stock positions we have always achieved. Inventory turns increased during the slowdown, and markdowns actually decreased compared to last year. The healthier gross margin that resulted enabled us to post after tax earnings of $76 million, which we viewed as a victory under the conditions with which we were confronted. 2008 also vindicated our long range real estate strategy: first, to exit the declining small store business in the malls; second, to sign shorter leases than those of our competitors; and third, to seek to relocate stores at the end of their terms to accommodate the ever-changing landscape of retail development. The success of this strategy is evident in the fact that our long-range lease obligations are declining as a percentage of sales, and that our sales per square foot lead the industry. Despite the bleak year, we did have a couple of bright spots on the horizon, notably the increase in children’s department sales, the increase in our membership card enrollments, and the solid results from Barnes & Noble.com, which were virtually flat to last year. To the extent that increased children’s book sales are a harbinger for the future of our business, we feel confident our better years lie ahead. Although some economic forecasters, most notably those in government, would like us to believe that the recession will end before year end, we believe it is risky to rely on those assumptions. Therefore, we have little choice but to manage our business with a wary eye on the near term, yet with a sense of optimism for the longer range future. If nothing else, these tougher times have caused us to become a better company; more focused than ever before, more effi cient in every way, and most importantly, more creative. Like all Americans, the 37,000 booksellers who are the backbone of Barnes & Noble are doing all of the big and little things to make business better. Even during the worst of times business activity continues, and the miracle of our economic engine remains the envy of the world. For me, nothing has changed the simple pleasure of curling up on my favorite sofa and reading a good book. Download Barnes & Noble 2008 Annual Report PDF format, 1.1MB, 50Pages. Corporate Headquarters CONTENTS nook™, the Barnes & Noble eBook reader What if you could hold Barnes & Noble in your hand and carry it with you everywhere you go? Now you can. Introducing nook, by Barnes & Noble—the world’s most advanced eBook reader. nook is designed to make buying, reading and sharing eBooks and digital content easy and fun. Our goal is simple: to give consumers access to any book, newspaper, magazine and other content they want — any time, anywhere. GENERAL Barnes & Noble conducts the online part of its business through barnesandnoble.com llc (Barnes & Noble. com), one of the largest sellers of books on the Internet. Through Sterling Publishing Co., Inc. (Sterling or Sterling Publishing), the Company is a leading general trade book publisher. Additionally, as of January 31, 2009, the Company owned an approximate 74% interest in Calendar Club, an operator of seasonal kiosks. The Company subsequently sold its interest in Calendar Club in February 2009. The results of Calendar Club have been classified as discontinued operations in all periods presented. The Company employed approximately 37,000 full- and part-time employees as of January 31, 2009. Barnes & Noble stores are located in all 50 states and the District of Columbia as of January 31, 2009. With over 40 years of bookselling experience, management has a strong sense of customers’ changing needs and the Company leads book retailing with a “community store” concept. Barnes & Noble’s typical store off ers a comprehensive title base, a café, a children’s section, a music/DVD department, a magazine section and a calendar of ongoing events, including author appearances and children’s activities that make each Barnes & Noble store an active part of its community. Barnes & Noble stores range in size from 10,000 to 60,000 square feet depending upon market size with an overall average store size of 26,000 square feet. Each store features an authoritative selection of books, ranging from 60,000 to 200,000 unique titles. The comprehensive title selection is diverse and tailored to each store location to refl ect local interests. In addition, Barnes & Noble emphasizes books published by small and independent publishers and university presses. Bestsellers (the “top ten” highest selling hardcover fi ction and hardcover non-fiction titles) typically represent between 3% and 5% of Barnes & Noble sales. Complementing this extensive in-store selection, all Barnes & Noble stores provide customers with on-site access to the millions of books available to online shoppers while off ering an option to have the book sent to the store or shipped directly to the customer through Barnes & Noble.com’s delivery system. All Barnes & Noble stores are equipped with the Company’s proprietary BookMaster in-store operating system, which enhances the Company’s merchandise-replenishment system, resulting in high in-stock positions and productivity at the store level through efficiencies in receiving, cashiering and returns processing. The Company is in the process of integrating the BookMaster system used in each store with Barnes & Noble.com so that its customers share the same experience across both channels. During fiscal 2008, the Company added 0.5 million square feet to the Barnes & Noble store base, bringing the total square footage to 18.7 million square feet, a 3% increase over the prior year. Barnes & Noble stores contributed approximately 88.3% of the Company’s total sales in fi scal 2008. The Company plans to open approximately 15 Barnes & Noble stores in fi scal 2009, which are expected to average 34,000 square feet in size. At the end of fiscal 2008, the Company operated 52 B. Dalton bookstores in 24 states and the District of Columbia. B. Dalton bookstores employ merchandising strategies that target the mainstream consumer book market, off ering a wide range of bestsellers and generalinterest titles. Most B. Dalton bookstores range in size from 2,000 to 6,000 square feet, and while they are appropriate to the size of adjacent mall tenants, the opening of book superstores in nearby locations continues to have a signifi cant adverse impact on B. Dalton bookstores. The Company is continuing its controlled descent in the number of its smaller format B. Dalton bookstores in response to declining sales attributable primarily to book superstore competition. Part of the Company’s strategy has been to close underperforming stores, which has resulted in the closing of 915 B. Dalton bookstores since 1989. The Company has a multi-channel marketing strategy that deploys various merchandising programs and promotional activities to drive traffic to both its stores and website. At the center of this program is Barnes & Noble.com, which receives over 365 million visits annually, ranking it among the top 15 multi-channel retailer websites in terms of traffi c, as measured by Comscore Media Metrix. As a result of this reach, the Company believes that its website provides signifi cant advertising power which would be valued in the tens of millions of dollars if such advertising were placed with third-party websites with comparable reach. In this way, Barnes & Noble.com serves as both the Company’s direct-tohome delivery service and as an important broadcast channel and advertising medium for the Barnes & Noble brand. For example, the online store locator at Barnes & Noble.com receives millions of customer visits each year providing store hours, directions, information about author events and other in-store activities. Additionally, customers can view store availability for book, music and video products through the website and reserve the available items for pick-up at the store. The Company firmly believes that its website is a key factor behind its industry-leading comparable store sales performance. The Company’s subsidiary Sterling Publishing is one of the leading publishers of non-fi ction trade titles, with more than 5,000 books in print. Founded in 1949, Sterling publishes a wide range of non-fiction and illustrated books, consisting primarily of subjects such as crafts, food and wine, mind / body / spirit, photography, puzzles and games, current aff airs and children’s books. Sterling also publishes books for a number of brands, including many of the Hearst magazines such as Good Housekeeping and Cosmopolitan, Hasbro, The American Museum of Natural History and AARP. Bookmark
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