Barnes & Noble: Pussyfooting Around Leases

Barnes & Noble (BKS) reported Q3 results and disappointed investors, if that is possible in today's environment. The one note of hope that management was able to hold out was that many of its stores' leases are coming up for renewal. They claim that most of the leases are being negotiated for much less than the existing terms.

That’s good, actually very good. But they cannot or will not provide any sort of schedule to show exactly what the impact on EPS will be from leases that have been favorably renegotiated. Also they do not disclose how many leases are coming up for renewal and exactly when we can expect cost reductions.

Cards are too close to the vest on this point. Also in reviewing the transcript of the conference call there was no discussion of the dividend. The yield is in the 8% range. You know that cannot hold... Analysts did not question, management did not disclose. See no evil, speak no evil but it's evil if you do not hear about this one.

Disclosure: None

Comments

[RealEstateM...:]

George, astute observation. Ridiculously, the reason for the lack of transparency is the fact that management just doesn't know what the benefits will be, if any, from the renegotiation of Barnes' existing leases because they are absolutely clueless when it comes to these long-term expense commitments that cloud the retailer's balance sheet. This is because the company has basically attorned to their gun slinging commercial real estate brokers, who in my decades long experience, know even less about how to manage the companie's real estate concerns. Management defaults to these sophomoric ego maniacal numbskulls because they don't have to pay them for their services. Yes, that is true; their real estate brokers are actually paid by the very landlords with which they are negotiating against! This occurs in over 90% of their transactions nationwide (new leases, lease renewals and re negotiations alike). Their is no accountability for these transactions on the part of the real estate brokers that "exclusively" represent B&N, as they are commonly (nearly always) indemnified and held harmless from their acts (excepting gross negligence) and they are completely exculpated from their own misjudgments and poor negotiating acumen and skill. Don't believe me? spend an hour with their key broker in Central Texas, the northeast or the southeastern US, or in many other geographical markets where they are represented by haughty self-absorbed unprofessionals, you would see very quickly that ignorance, when coupled with ego, is a very dangerous and costly combination for stakeholders to attorn to.... this part of their balance sheet will be forever hidden until Barnes changes their m.o.

2008 Nov 24 12:33 PM

[dingojoe:]

A "leaked" letter by Len Riggio was actually in the WSJ a few days before the earnings report and it said the retail environment was awful but B&N felt it could control costs and had no intention of cutting the dividend. Take it for what it's worth.

I saw that dividend number too, that plus the fact that Borders is on it's deathbed certainly maked BKS look like a nice opportunity, though it has bounced quite a bit off of it's low in the last few days.

2008 Nov 25 06:50 PM