Barnes and Noble 2007 Annual Report Download - page 4

BARNES & NOBLE 2007 LETTER TO SHAREHOLDERS
Dear Shareholder:
Although 2007 was a challenging year for the entire retail sector, including bookselling, Barnes & Noble achieved
growth in store sales, a fi ve-year high in online sales growth, and a record increase in our Member Program.
The year began with strong sales and a solid line-up of new titles. In fact, we enjoyed an early Christmas in July with the
seventh and fi nal installment of J.K. Rowling’s phenomenal Harry Potter and the Deathly Hallows.
While book sales were strong for the fi rst three quarters of 2007, sales of recorded music dropped dramatically in the
fourth quarter. That fall-off led to a disappointing holiday performance and negative comparable store sales.
Nevertheless, Barnes & Noble comparable store sales grew 1.8 percent and Barnes & Noble.com added $56 million to
its top line on a comparable basis to the prior year. Online sales increased 13.4 percent, the strongest performance
in more than fi ve years. Our newly designed website, incorporating many elements of Web 2.0 technology, as well as
containing new features and enhanced functionality, has led to an increase in traffi c and conversion.
We experienced record growth in our Member Program, adding more new Members in 2007 than in any year since
the program’s launch in October 2000. More importantly, our Member renewals are higher than ever. Fueling this
increase was the change in the Member discount structure in October 2006. The fi rst full year of the increased Member
discounts drove a record number of title sales – more than 1.1 million unique titles were sold, further evidence of the
ever lengthening “long tail” in our business.
By increasing discounts to our best customers, we believe we have strengthened our long-term position in the
marketplace. While price has never been the number one reason book buyers cite as a factor in choosing where to shop,
it has become progressively more important. And, of course, it is even more important online.
Tightened fi scal controls at every level of our organization and intensifi ed rigor around expense and inventory
management refl ected our ongoing commitment to operational excellence.
We delivered world-class service in 2007 and off ered unparalleled selection to customers thanks to our strong and
well-developed supply chain. Last year, we made the supply chain more effi cient and completed the consolidation of
our online and retail distribution centers. As we continue to focus on and improve our inventory management, our
results illustrate the fruits of our labor. Inventory turnover improved to 2.63 times, the highest level in our Company’s
history, as inventories increased less than one percent on a sales increase of 4.6 percent compared to the prior year.
Another success has been our Barnes & Noble Recommends program. The program showcases newly published titles
selected by our booksellers. Two selections, Chris Bohjalian’s The Double Bind, and Mohsin Hamid’s The Reluctant
Fundamentalist, became instant fi ction bestsellers upon publication.
One title we are especially proud of was our own illustrated edition of Peter Yarrow and Lenny Lipton’s classic song,
“Puff , the Magic Dragon,” which sold over half a million copies for Sterling Publishing.
2 Barnes & Noble, Inc.