This week was about the the new features B&N introduced to its Nook Color e-reader designed to make the device more competitive with the iPad and other tablets. What about new design for B&N's stores? Nada, at least for now. Given that B&N is still mostly a store-based retailer, it's not much of a surprise this week our B&N bankruptcy index goes down by half a point.
Just a short reminder - As Borders filed for bankruptcy, we look at Barnes & Noble, the nation's largest book chain to see if they will follow Borders and also go into bankruptcy and if so, when exactly.
To do it more analytically we launched few weeks ago a new B&N Bankruptcy Index, which is based on 10 parameters, which receive a grade between 1-10 (1 - worst grade, 10 - best grade). Hence we receive a 0-100 point index scale, which we divide into several ranges as follows:
90-100: B&N is in an excellent shape. Couldn't be better!
80-89: B&N is doing great. Bankruptcy is no longer a real threat.
70-79: B&N could do better and has to be cautious of bankruptcy.
60-69: B&N doesn't look too good and bankruptcy is becoming a more realistic threat.
50-59: Bankruptcy is a clear and present danger.
49 and less: Red alert! Bankruptcy is just around the corner and is likely to happen within a short time frame.
We will check the B&N Bankruptcy Index every Thursday, updating each one of the parameters included in the index and will analyze the trend. You can follow the weekly changes in the index from the day it was launched on the Barnes and Noble Bankruptcy Index page on our website.
So here's our update for this week (in brackets is last week's grade):
1. Confidence of the stock market in B&N
This parameter will look at the performance of the B&N stock (symbol: BKS) in the last week. The performance of B&N's stock is an indication of the confidence the market has in the ability of B&N to maintain a viable business.
So let's look at last week's figures:
4/20: $10.66
4/27: $9.90
Change: -7.1%
As you can see, B&N's stock fell 7.1% last week. Just for comparison, Amazon lost 0.9% last week and the S&P500 Index gained 1.3%.
Alyce Lomax was unfavorable to say the least about B&N stock on The Motley Fool with headline saying simply -Run From This Stock! And she explains:
Although Barnes & Noble has been able to pull off sales increases over recent years, its gross profit has dropped to 25.6% in the last 12 months, down from highs as great as 37% in recent years. Same-store sales have fallen several years running, and the company failed to turn a profit last year. For the trailing 12 months, Barnes & Noble has reported a disheartening $0.81 loss per share. The recessionary climate hasn't made things easy for booksellers, and its falling profit margins suggest that Barnes & Noble's had to offer deep discounts to keep customers coming back.
What about the Nook and the latest improvements? She's not convinced it can really change the big grimy picture: "The rise of e-books to challenge traditional paper tomes makes matters even worse...This heated competition explains Barnes & Noble's Nook Color enhancements, but such admirable efforts don't guarantee marketplace success."
If you listen to Jim Cramer, he also recommends to be cautious about B&N's stock: The book store chain operator has a great management team, Cramer said. Even so, it's been very tough for them to compete against Amazon.com. He would be cautious with BKS.
This week was about the the new features B&N introduced to its Nook Color e-reader designed to make the device more competitive with the iPad and other tablets. What about new design for B&N's stores? Nada, at least for now. Given that B&N is still mostly a store-based retailer, it's not much of a surprise this week our B&N bankruptcy index goes down by half a point.
