Barnes and Noble 1998 Annual Report Download - page 35

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MANAGEM ENT’S DI SCUSSI ON AND A N A LYSI S OF
FI NANCI AL CONDI TI ON AND RESULTS OF OPERATI ONS
The Company’s fiscal year is comprised of 52 or 53 weeks,
ending on the Saturday closest to the last day of January. As
used in this section, “fiscal 1998” represents the 52 weeks ended
January 30, 1999, “fiscal 1997” represents the 52 weeks ended
January 31, 1998 and “fiscal 1996” represents the 53 weeks
ended February 1, 1997.
General
B a rnes & Noble, Inc. (Barnes & Noble or the Company), the
world’s largest bo o k s e l l er*, as of January 30, 1999 operates 1,009
bo o k s t o r es. Of these 1,009 stores, 520 operate under the Barn e s
& Noble Booksellers, Bookstop and Bookstar trade names, (50 of
which we re opened in fiscal 1998), and 489 operate under the
B. Dalton Bookseller, Doubleday Book Shops and Scribner’s
B o o k s t o re trade names. Through its fifty percent interest in
b a rnesandnoble.com llc (barnesandnoble.com), the Company is
also the world’s largest bookseller on the World Wide We b
( h t t p : / /w w w. b a r nesandnoble.com) and the exclusive bo o k s e l l e r
on America Online (keywo rd: bn). Barnes & Noble publishes
books under its own imprint for exclusive sale through its re t a i l
s t o res, mail-order catalogs and barnesandnoble.com. The
C o m p a ny employed approximately 29 , 0 00 full- and part-time
booksellers and created nearly 2,000 new jobs nationwide during
fiscal 1998 primarily due to its Barnes & Noble store expansion.
Barnes & Noble is the largest operator of book “super”
stores in the United States* with 520 Barnes & Noble stores
located in 49 states and the District of Columbia as of January
30, 1999. With more than 30 years of bookselling experience,
management has a strong sense of customers’ changing needs
and the Company leads book retailing with a “community
store” concept. Barnes & Noble’s typical store offers a compre-
hensive title base, a cafe, a children’s section, a music depart-
ment and a calendar of ongoing events, including author
appearances and children’s activities, that make each Barnes &
Noble store an active part of its community.
Barnes & Noble stores range in size from 10,000 to 60,000
square feet depending upon market size, and each store features
a comprehensive selection of books, ranging from 60,000 to
175,000 titles. The title selection is diverse and reflects local
i n t e rests. In addition, Barnes & Noble emphasizes books
published by small and independent publishers and university
presses. Bestsellers represent only 3% of Barnes & Noble store
sales. Complementing this extensive on-site selection, all Barnes
& Noble stores provide customers with access to the millions of
books available to online shoppers while offering an option to
have the book sent to the store or shipped directly to the cus-
tomer. During fiscal 1999 the Company expects to complete
installation of BookMaster, the Company’s new in-store operat-
ing system, in all Barnes & Noble stores. BookMaster enhances
our existing merchandise replenishment systems, resulting in
higher in-stock positions and better productivity at the store
l e vel through efficiencies in receiving, cashiering and
returns processing.
Barnes & Noble stores opened during fiscal 1998 added 1.3
million square feet to the Barnes & Noble base, bringing the
total square footage to 11.9 million square feet, a 10% increase
over the prior year. Barnes & Noble stores contributed more
than 84% of the Company’s total sales in fiscal 1998. The
Company plans to open approximately 50 Barnes & Noble
stores in 1999 which are expected to average 26,000 square feet
in size.
At the end of fiscal 1998, the Company operated 489
B.Dalton stores in 45 states and the District of Columbia.
B. Dalton stores employ merchandising strategies that target the
“middle-American” consumer book market, offering a wide
range of bestsellers and general-interest titles. Most B. Dalton
stores range in size from 2,800 to 6,000 square feet, and while
they are appropriate to the size of adjacent mall tenants, the
opening of superstores in nearby locations continues to have a
significant impact on B. Dalton stores.
The Company is continuing to execute its strategy to
maximize returns from its B. Dalton division in response to
declining sales attributable to superstore competition and
weaker overall consumer traffic in shopping malls. Part of the
Company’s strategy has been to close underperforming stores,
which has resulted in the closing of, on average, between 40 and
60 B. Dalton stores per year since 1989.
b a rnesandnoble.com, a limited liability company created in
N ove m ber 1998 (as discussed more fully be l ow) was formed by
combining the online bookselling operations of the Company
with funds contributed by the international media company
Bertelsmann AG (Bertelsmann), one of the largest integr a t e d
media companies in the world. barnesandnoble.com has the
world’s largest selection of books* — more than eight million
in-print and out-of-print books. In less than two years of
operations, it has become the fourth most-trafficked e-commerce
site and among the top 25 largest overall sites on the
I n t e r net, as of December 1998, according to Media Metrix.
b a rnesandnoble.com has access to the largest standing inve n t o r y
of any online bookseller with more than 750 , 000 titles ready for
immediate delive r y. The site’s database features more than six
and one half million out-of-print and rare books, as well as the
largest online selection of bargain books discounted up to
90 percent. During 1998, many major enhancements we re intro-
duced, including one-click ordering, a powerful and user friendly
s e a rch engine, email book reviews and product-notification
services, Software and Magazine stores, a Gift Center and
B a r g ain Book store and online gift certificates. Also during 1998 ,
the site be gan to add music and video to its product offerings, as
well as an out-of-print book service. barnesandnoble.com is the
e x c l u s i ve bookseller to America Online (AOL)’s more than 16
million subscribers. The Company’s affiliate network pays the
highest commissions with the best linking and best re p o r t i n g
* Based upon information reported in trade publications and public filings.