Barnes and Noble 2013 Annual Report Download - page 15

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The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales of
the Company:
Fiscal Year Fiscal 2013 Fiscal 2012 Fiscal 2011
Sales 100.0% 100.0% 100.0%
Cost of sales and occupancy 75.4 73.1 74.3
Gross margin 24.6 26.9 25.7
Selling and administrative expenses 24.5 24.4 23.3
Depreciation and amortization 3.3 3.3 3.3
Operating loss (3.2) (0.8) (0.8)
Interest expense, net and amortization of
deferred financing fees (0.5) (0.5) (0.8)
Loss from continuing operations before taxes (3.7) (1.3) (1.6)
Income taxes (1.4) (0.4) (0.6)
Loss from continuing operations
(net of income tax) (2.3)% (0.9)% (1.0)%
BUSINESS OVERVIEW
The Company’s financial performance has been signifi-
cantly impacted in recent years by a number of factors,
including the economic downturn, increased online com-
petition and the expanding digital market. However, the
Company has benefited from reduced physical bookstore
competition in the marketplace, as well as the successful
execution of new merchandising strategies.
The Company derives the majority of its sales and net
income from its B&N Retail and B&N College stores.
B&N Retail comparable store sales benefited as one of B&N
Retail’s largest competitors in the sale of physical books,
Borders Group, Inc. (Borders), completed liquidating all of
its stores under Chapter 11 of the Bankruptcy Code in early
fiscal 2012.While the Company expects declining physi-
cal book trends to continue industry-wide as consumer
spending shifts further online and toward digital products,
it expects to be the beneficiary of further market consolida-
tion as other non-book retailers reduce their presence in
the book category. Additionally, the Company continues
to experience positive trends in its Gift and Toys& Games
businesses as a result of the successful execution of new
merchandising strategies.
The Company has leveraged its unique assets, iconic
brands and reach to become a leader in the distribution of
digital content.In 2009, the Company entered the eBook
market. Since then, the Company launched its NOOK®
brand of eReading products, which provide a fun, easy-
to-use and immersive digital reading experience. With
NOOK®, customers gain access to the expansive NOOK
Store™ of more than three million digital books, plus peri-
odicals, comics, apps, movies and TV shows, and the ability
to enjoy content across a wide array of popular devices
through free NOOK Reading Apps™ and NOOK Video apps.
Over the past several years, the Company has introduced
leading devices in the tablet and eReader categories.
In April2012, the Company introduced NOOK Simple
Touch™ with GlowLight™, the world’s first E Ink device
with patent-pending lighting technology that lets you read
in the dark. In September 2012, the Company introduced
NOOK® HD, the lightest and highest-resolution 7-Inch HD
tablet, and NOOK® HD+, one of the lightest full HD tablets.
In addition to NOOK® devices, the Company makes it easy
for customers to enjoy any book, anytime, anywhere with
its free line of NOOK® software specific application, which
has won the Webby People’s Voice Award. Customers can
use Barnes& Noble’s eReading software to access and read
books from their personal Barnes& Noble digital library
on devices including Windows 8 PCs and tablets, iPad™,
iPhone®, Android™ smartphones and tablets, PC and
Mac®. The Lifetime Library™ helps ensure that Barnes&
Noble customers will always be able to access their digi-
tal libraries on NOOK® products and software-enabled
devices. The Company also offers NOOK Newsstand™,
which provides an extensive selection of digital newspa-
pers and magazines, available in both subscription and
single copy format, NOOK Kids™, a collection of digital
picture and chapter books for children, NOOK Study™, an
innovative study platform and software solution for higher
2013 Annual Report 13