Shares in Barnes & Noble Inc. (BKS) have plummeted 37% since mid-February. Now it appears that no one is interested in acquiring BKS after the nation’s largest book seller put itself up for sale last year.
Last month, Barnes & Noble nuked its dividend in an effort to improve “financial flexibility” and make itself more attractive to a potential acquirer. Now Barnes & Noble investors are left with no dividend and no potential buyers. That leaves little to prop up its sagging stock price.
Of course it was obvious that the dividend wasn’t safe at Barnes & Noble. No company can be expected to continue paying $1 per share in dividends each year when it is only earning $.39 per share.
Now the profits are disappearing altogether. Wall Street is forecasting losses for Barnes & Noble over the next couple of years, which is hardly inspiring to value investors.
The company does appear to have a successful e-reader product in the Nook. The company has touted the Nook as the future of the company and has even claimed to have 25% market share in the hot e-reader market. That sounds like a huge success for Barnes & Noble, but of course it depends entirely on how you measure that success.
Sure the Nook is outselling the lower tier e-readers like the Kobo and there were even rumors that last March the Nook outsold the Amazon (AMZN) Kindle. It’s doubtful that the Nook is still outperforming the Kindle, but neither company will specify exactly how many e-readers they are selling.
It does appear clear that both the Kindle and Nook trail market leader and shadow dividend stock Apple (AAPL). Last quarter alone Apple sold 7.3 million iPads. Obviously if Nook sales were even close to that level Barnes & Noble would be trumpeting it to the masses.
That leaves Barnes & Noble with a brick & mortars business that just reported declining same store sales in the key holiday quarter. A stock that offers no dividend. The prospect of reporting losses in fiscal 2011 and 2012. And maybe most importantly in the short term, no buyers for the company.
Even with top competitor Borders Group (BGP) filing for bankruptcy and closing 200 stores, it is going to be challenging for Barnes & Noble to execute a turnaround. Of course everyone loves a comeback story and if Barnes & Noble succeeds I’m sure it will be stocking that book in stores and on the Nook. However, for now the stock is desperately looking for a catalyst that will stop the free fall.