barnesandnoble.com: Another Try
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In late September, I wrote a profile on barnesandnoble.com (BNBN) ("Barnesandnoble.com: Trying to Come Up with a Happy Ending"), thinking it was poised for a nice move.
The price was at 18-5/16.
The price now? Well, it's at 18 7/16.
Yet, during this time, the company has been making smart moves. While Amazon.com is entering a myriad of unrelated businesses, barnesandnoble.com is focusing on its strengths.
But there was more. As part of this deal, barnesandnoble.com will cross-promote with Cendant online properties, such as DaysInn.com and ShoppersAdvantage.com.
barnesandnoble.com also struck a deal with Netmarket Group (NGI) to become the exclusive online book and music retailer. Netmarket Group runs AutoVantage.com, TravelersAdvantage.com, PrivacyGuard.com and FareAgent.com.
Moreover, the company has been leveraging its platform, but not straying from its core competencies. The company recently added electronic greeting cards, as well as prints and posters (which are museum-quality and range in price between $35 and $500).
barnesandnoble.com is translating its momentum into strong financial results. In its latest quarterly filing, sales surged from $15.6 million to $49.1 million, which was $9.1 million better than analysts' expectations. The company added 581,000 customers and expects to have 3.5 million by the end of this year. Of course, this does not come close to Amazon.com's 13 million customers, but barnesandnoble.com is ranked fourth for e-commerce sites according to MediaMetrix.
A key advantage is that barnesandnoble.com has a preexisting distribution; Amazon.com, on the other hand, must spend billions developing their own. This helps explain the controlled burn-rate of barnesandnoble.com. In its last quarter, the company lost $21.9 million, which compares to $18.6 million in the same quarter a year ago. Actually, the losses are mainly the result of heavy marketing expenses, which were $26.3 million in the latest quarter.
The company has no long-term debt and $561 million in the bank. I suspect there will be more surprises on the upside and eventually, investors will catch-on to the solid fundamentals. It has taken some patience, but it should be worth the wait.
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