After a brief struggle in the tablet market, Barnes & Noble is pulling out.
On Tuesday, the company announced that hits to its NOOK segment helped to drive its losses upward in its latest quarter. From February to April, Barnes & Noble's net losses were at $2.11 per share, for a total of nearly $119 million. Just a year ago, losses totaled around $57 million, or $1.06 per share. NOOK revenues were down sharply last quarter, by 34 percent from a year ago.
As part of its plan to stop its NOOK losses, Barnes & Noble now says it will have a third party manufacture its color NOOK HD and NOOK HD+ tablets, in an effort to mitigate the risks from manufacturing the tablets itself, the company said. Barnes & Noble will, however, continue to make its black-and-white eReaders and to sell NOOK-branded color tablets, as well as eReader content.
It wasn't just slower device sales that pulled down revenues. Sales of digital content (like books and magazines), while up by more than 16 percent for the year, were down 8.9 percent for the fourth quarter – a drop the company attributed in part to weaker titles this year, compared to the popularity of the Hunger Games and Fifty Shades of Grey trilogies last year.
"We are taking big steps to reduce the losses in the NOOK segment, as we move to a partner-centric model in tablets and reduce overhead costs," explained CEO William Lynch in a statement.
As the tablet market experiences explosive growth, competition has grown fierce. According to market research firm IDC, tablet shipments grew 142 percent year-over-year in the first quarter of 2013. But in that quarter, Barnes & Noble wasn't even among the top five tablet vendors.
The company also expects to open five new stores and close 15 to 20 new ones in the coming year. That rate of store openings and closings is consistent with what the company has done in recent years, says CFO Michael Huseby, and does not reflect that the company is shifting its focus away from brick-and-mortar retail.
"[Our strategy] is to expand our business in all fronts," he says. "To help our customers get a book anytime, anywhere. In the stores, online, through digital devices."
Amid the tablet difficulties, the company said it had a strong fiscal year 2013 performance in its retail and college segments. However, the outlook isn't sunny for the company's stores: Barnes & Noble expects percentage declines for comparable bookstore sales to be in the high single digits for fiscal year 2014, and for percentage declines in college comparable store sales to be in the low single digits, according to a statement released Tuesday.
The latest news from the company helped drive Barnes & Noble's stock price down on Tuesday. As of midday, it had fallen nearly 17 percent from the morning's open, to under $16.