Barnes & Noble’s fiscal Q4 and full year results were hammered by its Nook business, with losses for the company doubling for the quarter and the year.   The company announced that it's going to dump the rest of its color Nook devices and exit the business, working with a partner to create a co-branded device that it will no longer manufacture.

For the quarter ended April 27, the company lost $118.6 million vs. a loss of $56.9 million in the prior year.  Sales dropped 7.4% for the quarter. 

For the fiscal year, sales dropped 4.1%, and the company lost $154.8 million, vs. $65.6 million in the prior year. 

Its bookstore business was profitable on an EBITDA basis for both the quarter and the year, but same store sales declined 8.8% for the quarter and 3.4% for the full year.  Over-all sales in the retail segment were down 5.9% for the year, a bigger number due to store closings, e-commerce declines, and declining Nook sales in stores.  The good news for the chain is that "core comparable bookstore sales," which do not include Nook sales, were essentially flat for the full year (although they declined 5.8% in the quarter).

Inventories in the bookstores were down around 10%, or around $151 million.

The company closed 18 stores and opened 2, for a net decline of sixteen stores.  Barnes & Noble has said it expects the number of stores it operates to decline by about a third over the next decade (see "B&N Confirms Plans to Close Stores").

The college stores were also profitable for the quarter and the year, with sales increasing due to more contracts.  The company opened 49 new college stores and closed 10, for an increase of 39. 

But blood was flowing in the Nook segment, which lost $177 million in the quarter (EBITDA), and $475 million for the year.  Much of those losses were related to price reductions and promotions to move its color Nook devices, which stopped selling late last year (see "Nook Sales Plummet").  In addition to the losses on products it sold, Barnes & Noble also wrote down its inventory $222 million and took an $18.3 million impairment charge related to lower expected selling prices for the devices in the future. 

Nook sales were down 16.8% for the year and 34% for the quarter.  That wasn’t all declines in device sales; digital content sales dropped 8.9% in the quarter, although they managed a 16.2% increase for the full year. 

Plans to cut losses in the Nook segment include expense reductions, enhancements of digital bookstore and reading apps, and “de-risking” the Nook by getting out of the color device business.  People who buy b/w reading devices actually buy more content, according to the company, and it feels it can better serve the color portion of the market by having a company in the business making the tablets on a co-branded basis. 

The company’s cash position is good, with cash of $160.5 million at year-end and only $77 million of borrowings under its $1 billion revolving credit facility.  That’s down from $270 million in debt a year ago.  But its balance sheet isn’t exactly strong, with a net equity of only $673 million, which would be wiped out by another year and a half of losses like the company endured last year. 

Many feel that if the company would only focus on its retailing business that it could be successful.  Last year was actually a good year in the book business (Fifty Shades of Grey), and Barnes & Noble wasn’t the only chain to make money on its stores (see "Book Chain Makes Money"). 

A break-up of the company has been proposed, with founder Leonard Riggio preparing a plan to buy the bookstores and e-commerce business and take them private (see "Barnes & Noble Break-up?").  Unfortunately, the Nook business isn’t exactly desirable.  Microsoft has let it be known that a rumored acquisition of the business (see "Barnes & Noble Could Get $1 Billion") isn’t going to happen, so some other solution will have to be found. 

Over the next fiscal year, the company expects comp sales in its bookstores to decline "in the high single digits," and in the "low single digits" in its college stores.