Today, the market is reacting negatively to the Barnes & Noble Q1 earnings report (NYSE:BKS) for fiscal year 2018. The first quarter earnings call and report saw the bookseller miss expectations. For Q1 FY18, analysts forecasted EPS of -$.12 (-12 cents) on revenue of $873 million. Unfortunately for shareholders, Barnes & Noble reported EPS of -$.15 (-15 cents) on $853.3 million in revenue.
In addition, the company stated same-store sales decreased 4.9% this quarter. Regarding full-year guidance of same-store sales, Barnes & Noble maintained its outlook of single-digit declines. In pre-market trading, BKS stock tumbled over 20%. Throughout intraday trading today, Barnes & Noble stock trended up from its lows from the opening bell. BKS stock currently trades at $7.15 per share. Here is a live chart of BKS with an additional tab of the S&P 500 index.
Is Amazon to Blame for Barnes & Noble Q1 Earnings Miss?
All of this comes at a time when retailers are adapting their strategies to combat Amazon's disruptions. Fortunately, Barnes & Noble has perhaps the most experience dealing with Amazon. Indeed, Amazon's first market was book retail. The fact Barnes & Noble is still operating after years of Amazon streamlining the book shopping experience should give BKS shareholders peace of mind.
Furthermore, Barnes & Noble has valuable strategic partnerships with educational institutions. Quite possibly, these partnerships are what allowed Barnes & Noble to weather the Amazon storm over many years. For example, many colleges (such as our own, Indiana University) use Barnes & Noble as the primary facilitator for students buying textbooks each semester.
Last, Amazon's continued disruption of various industries may actually benefit Barnes & Noble over the next couple years. At first glance, this seems counter-intuitive. However, as Amazon becomes increasingly focused on other industries, it will spend fewer resources on retailing books. Simultaneously, Barnes & Noble will maintain its focus and continue to bolster its online capabilities. Therefore, it may actually benefit from Amazon's new initiatives like grocery and delivery services.
BKS Stock Rating
Despite the clear buying opportunity for long-term value investors, we are not adding BKS to the Bullish List or the Bearish List. The relative strength in BKS stock is too low to warrant buying the dip today. However, as the stock begins to make a more significant recovery, we may upgrade it from a neutral opinion to a buy opinion.