Barnes and Noble 2015 Annual Report Download - page 15

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 2015 Fiscal 2014 Fiscal 2013
Sales 100.0% 100.0% 100.0%
Cost of sales and occupancy 69.1 70.9 75.4
Gross margin 30.9 29.1 24.6
Selling and administrative expenses 25.5 25.2 24.5
Depreciation and amortization 3.2 3.4 3.3
Operating income (loss) 2.2 0.5 (3.2)
Interest expense, net and amortization of deferred
financing fees 0.3 0.5 0.5
Income (loss) before taxes 1.9 0.1 (3.7)
Income taxes 1.3 0.8 (1.4)
Income (loss), net of income tax 0.6% (0.7)% (2.3)%
BUSINESS OVERVIEW
The Company’s financial performance has been signifi-
cantly impacted in recent years by a number of factors,
including the expanding digital market, increased online
competition and the economic downturn. However, the
Company has benefited from reduced physical bookstore
competition in the marketplace, the successful execution
of new merchandising strategies, its ability to acquire new
college contracts and by expanding its offerings to col-
lege students. Additionally, the Company has leveraged
its unique assets, iconic brands and reach to become a
significant aggregator and distributor of digital content,
although competition from much larger companies with
greater resources has challenged the Company’s ability to
maintain its share of the U.S. eBook market.
The Company derives the majority of its sales and net
income from its B&N Retail and B&N College stores.
In recent years, B&N Retail has experienced declining sales
trends due to secular industry challenges, including the
growth of the digital book market and online shopping,
declining sales of NOOK® devices and fewer stores. More
recently, the Company has benefitted from improving book
industry trends, including a moderation of the growth of
the digital book market, as well as successful merchandis-
ing initiatives that increased store traffic and sales and
drove positive trends in its Toys & Games and Gift busi-
nesses. Additionally, the Company continues to expect to
benefit from further market consolidation as non-book
retailers reduce their presence in the book category.
The Company is making further investments in its retail
business this fiscal year and is scheduled to launch a new
eCommerce platform in June , which it believes will
allow it to be more competitive in the marketplace.
B&N College provides direct access to a large and well-
educated demographic group, enabling the Company to
build relationships with students throughout their college
years and beyond. The Company also expects to be the ben-
eficiary of market consolidation as more and more schools
outsource their bookstore management. The Company
is in a unique market position to benefit from this trend
given its full suite of services: bookstore management,
textbook rental and digital delivery. The Company is mak-
ing further investments in its college business, including
the launch of YuzuTM in March , its developing digital
education platform that provides access to a wide range
of rich, engaging content, including digital textbooks and
select consumer titles applicable to the higher education
market. The Company believes higher education provides a
long-term growth opportunity, both organically by adding
additional bookstores to its outsourcing model, and also,
through strategic acquisition and merger activity.
NOOK represents the Company’s digital business, which
includes the Company’s eBookstore, digital newsstand and
sales of NOOK® devices and accessories. The underlying
strategy of the NOOK business is to offer customers any
digital book, newspaper or magazine, anytime, on any
device. The Company remains committed to delivering
to customers the best digital bookstore experience, while
rationalizing its existing cost structure. As part of this
2015 Annual Report 13