Barnes and Noble 2002 Annual Report Download - page 11

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book superstore competition. Part of the Company’s
strategy has been to close underperforming stores,
which has resulted in the closing of between 35 and
90 B. Dalton bookstores per year since 1989.
The Company currently has a 38 percent ownership
interest in Barnes & Noble.com, a leading internet-
based retailer of books, music, DVD/video and online
courses. Since opening its online store (www.bn.com)
in March 1997, Barnes & Noble.com has attracted
more than 13.6 million customers in 232 countries.
Barnes & Noble.com’s bookstore includes the largest
in-stock selection of in-print book titles with access
to approximately one million titles for immediate
delivery, supplemented by more than 30 million listings
from its nationwide network of out-of-print, rare and
used book dealers. Barnes & Noble.com offers its
customers fast delivery, easy and secure ordering and
rich editorial content.
According to Jupiter Media Metrix, in December 2002,
Barnes & Noble.com’s Web site was the ninth most-
trafficked shopping site and was among the top 50
largest Web properties on the Internet. Co-marketing
agreements with major Web portals such as AOL,
Yahoo! and MSN as well as content sites have extended
Barnes & Noble.com’s brand and increased consumer
exposure to its site. Barnes & Noble.com has also
established a network of remote virtual storefronts
across the Internet by creating direct links with more
than 176,000 affiliate Web sites.
Barnes & Noble further differentiates its product
offerings from those of its competitors by publishing
books under its own imprints. The Company, through
its January 2003 acquisition of Sterling Publishing Co.,
Inc. (Sterling), is one of the top 25 publishers in the
nation and the industry’s leading publisher of how-to
books. Sterling has an active list of more than 4,500
owned and distributed titles, and publishes and
distributes more than 1,000 new titles annually. As a
leading publisher of how-to books, Sterling has strength
in art technique, gardening, cooking, health, crafts,
puzzle and game, woodworking and house and home.
With the addition of the Sterling titles, the Company
has publishing or distribution rights to nearly 10,000
titles and offers customers high quality books at
exceptional values, while generating attractive gross
margins.
The Company acquired Babbage’s Etc. and Funco, Inc.
in October 1999 and June 2000, respectively. Through
a corporate restructuring, Babbage’s Etc. became a
wholly owned subsidiary of Funco, Inc. and the name
of Funco, Inc. was changed to GameStop, Inc. In
February 2002, the Company completed an initial
public offering for its GameStop subsidiary. The
Company retained an approximate 63 percent interest
in GameStop. GameStop is the nation’s largest video-
game and PC-entertainment software specialty retailer,
operating 1,231 video-game and entertainment-software
stores located in 49 states, Puerto Rico and Guam. The
video-game and entertainment-software stores range
in size from 500 to 5,000 square feet (averaging 1,500
square feet) depending upon market demographics.
Stores feature video-game hardware and software,
PC-entertainment software and a multitude of accessories.
GameStop operates stores under the GameStop,
Babbage’s, Software Etc. and FuncoLand trade names,
a Web site, gamestop.com, and Game Informer
magazine (collectively, GameStop or Video Game &
Entertainment Software).
CRITICAL ACCOUNTING POLICIES
Management’s Discussion and Analysis of Financial
Condition and Results of Operations discusses the
Company’s consolidated financial statements, which
have been prepared in accordance with accounting
principles generally accepted in the United States. The
preparation of these financial statements require
management to make estimates and assumptions in
certain circumstances that affect amounts reported in
the accompanying consolidated financial statements
and related footnotes. In preparing these financial
statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. The
Company does not believe there is a great likelihood
[MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS continued ]
10
2002 Annual ReportBarnes & Noble, Inc.