Can Google Save Barnes & Noble From Amazon.com?
Estimize | Sep 09, 2014 12:47AM ET
Google (NASDAQ:GOOGL) to revitalize its online sales.
Over the past 2 years Barnes & Noble has a posted quarterly loss in 6 out of 8 quarters. While Barnes & Noble has shown difficulty in remaining profitable, the company has managed to cut its losses or report gains over 3 consecutive quarters. However, over the same 3 periods total revenue has fallen by 8%, 10%, and only improved by a marginal 4% sequentially.
Barnes & Noble’s only 2 profitable quarters over the past 2 years were the 3rd and 4th quarters of its fiscal 2014. In each of those quarters Barnes & Noble topped the Estimize consensus and saw their stock price push higher. Shares of Barnes & Noble have been doing quite well this year thanks to optimism about a turnaround despite a lack of profits.
In an unlikely alliance, Barnes & Noble announced a partnership with Google last month to take on Amazon. Barnes & Noble will be leveraging Google’s juvenile logistics wing, Google Shopping Express, to go after Amazon’s foothold on the business of fast and cheap book deliveries.
Barnes & Noble is teaming up with Google in an attempt to bolster its online sales because its brick and mortar sales have remained stagnant. Contributing analysts on Estimize are forecasting that Barnes & Noble’s sales will remain roughly flat compared to last year. Over the past 5 years Barnes & Noble has closed over 60 stores in an effort to reduce costs and improve the bottom line.
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Barnes & Noble’s offensive on digital sales appears well timed. Book readers have become frustrated with some of the hardball tactics Amazon uses to negotiate with book publishers. Amazon’s recent feud with Hachette has been especially high profile, and consumers mostly seem to be siding with Hachette.
Negative publicity at Amazon may work in Barnes & Noble’s favor, but the bookstore chain is being criticized for leaving a key piece of e-commerce on the table. The joint-venture transactions will be processed through Google Shopping, not through Barnes & Noble’s own webpage. Between collecting a cut of sales and and gathering more consumer data, Google’s motivation to jump into partnership with Barnes & Noble is obvious.
Barnes & Noble’s new deal with Google offers hope that revenue may improve quickly. Sales at Barnes & Noble had fallen 5 quarters in a row on a year over year basis before rising 4% last quarter. Unfortunately the 4% gain was not much too brag about considering they were only going up against a 7% decline in the same quarter one year prior. However it was a step in the right direction and leveraging Google’s logistics infrastructure may provide a boost in sales in exchange for handing over data.
Barnes & Noble CEO Michael P. Huseby called the partnership a test, but clearly Barnes & Noble has a lot more riding on this than Google. In the grand scheme of Google online book sales are just a drop in the bucket, but the deal does give Google the opportunity to expand and improve its young same day delivery service. For now Google while look continue testing the waters to determine if it wants to fight a high budget battle with Amazon. Barnes & Noble does not have the luxury of scouting things out first, they and Amazon are already at war.
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