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Barnes and Noble 7 Barnes and Noble Evaluation Barnes and Noble


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Barnes and Noble Evaluation
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       Barnes and Noble, is one of the largest book retailers in the United States. They

are also in the special retailing industry. The head quarters for Barnes and Noble is in

Manhattan on Fifth Avenue. Barnes and Noble originated in 1873. In addition to this,

Barnes and Noble also operates a smaller chain called “B. Dalton Booksellers”. They

currently sale Common stock in the New York Stock Exchange (NYSE) as BKS. The

Barnes and Noble stores are primarily known for their upscale retail outlets that contain

care’s and Starbucks inside of them. They also have a competitive edge with discounted

bestsellers books. These stores contain magazines, newspapers, DVD’s, graphic novels,

gifts, games, and music. According to Wikipedia, “As of May 2, 2008, the company

operated 798 stores in all 50 U.S. states and the District of Columbia. Of them, 85 are B.

Dalton outlets. The company has closed 882 B. Dalton stores since 1989 and says that

they will continue to do so.” (Wikipedia) Overall, Barnes and Noble has been thriving

and accomplishing firsts in many categories. Throughout all this, Barnes and Noble has

stayed strong and is still finding creative ways to stay at the top for many years to come.

       Just looking at the numbers for 2008 and 2007 it is obvious that this company has

done well despite a crumbling economy and gas prices. There was an increase in positive

areas in comparison to each year. The economic crisis that is happening in the United

States has put the services and specialty retail industry in a difficult predicament. This is

especially because of the rise is gas prices because of the delivery vehicles that these

companies used. Profit numbers have increased fairly well in comparison to the previous

years profits. Compared to 2007, Barnes and Noble has loss 150,391 million dollars in

net income. In 2008 Barnes and Noble had earned 135,799 billion dollars in net income

compared to 2007 where a total of 150,527 billion dollars were earned. Barnes and Noble
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sales and revenue went up as well from 5.26 billion in 2007 to 5.4 billion in 2008. Of

course with these increases, the shareholder’s value went up as well from a 52 week low

of 10.77 per share in 2007 to 33.64 per share in 2008. Because Barnes and Noble is also

located throughout the world, this was also the reason why profits and shares increased.

For Barnes and Noble it was definitely not good year overall, but still not as bad as others

in this industry have recorded. Although the 2009 numbers are not out yet, it is safe to

say that because of the current economic slump and gas price increases that we can

expect the numbers for 2009 to be even or slightly better than 2008.

       In comparison to 2007, 2008 was a good year for the Barnes and Noble. In

comparing the current assets to the current liabilities, the current ratio, it shows that the

current ratio is 1.24 to 1 with the current assets being 2.0 million and the current

liabilities being 1.6 million for 2008. The same analysis for 2007 shows that the current

ratio is 1.28 to 1 with the current assets being 1.9 million compared to the liabilities being

1.5 million. The quick ratio, which considers a more reliable indicator of the Barnes and

Noble’s ability to meet its short-term financial obligations, for 2008 was .38 to 1 which

included the current inventory of 1.4 million. This number was created without a

depreciation value. For 2007 the quick ratio was also .38 to 1 which included the current

inventory of 1.4 million. This number was created without a depreciation value as well.

This information shows how the Barnes and Noble was able to better handle their short-

term obligation in 2008 and 2007 when they were close to being even with the current

and quick ratios but were still not as ready to handle those obligations as they were in

2007. In comparing the inventory turnover ratio it is also clear that more inventory was

held in 2007 than in 2008. The ratio for 2007 was 3.88 times compared to 3.95 times in
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2008. The Net sales for 2007 was 5,261 million and the total inventory was 1,354

compared to the 2008 net sales which was 5,410 million and the inventory which was

1,366 million. This shows me that Barnes and Noble was holding on their inventory more

in 2008 than they were in 2007. This is obviously because of the decrease in sales as a

national average because of the economic slump that we are in and were in then.

Compared against the industry averages, there truly are not too many differences because

the whole industry has had a decent year because the demand for the services that these

companies provide is always steady. Although this is true, other companies in this

industry such as Amazon, acknowledged the change in gas prices in assuring their

customers that their pricing would still be the best. Barnes and Noble did the same thing,

while still providing quality services and discounts. One company in this industry that

stands out is Border’s Group, also known as Borders Book store. Their net income was

negative 144 million. This is a big distinction in comparison to the rest of the industry.

This demand being pretty balanced has balanced out the supply as well. Because the 2008

ratio was high, it implies that the Barnes and Noble had strong sales; on the other hand,

the even higher ratio for 2007 implies that the sales for that year were even better,

preventing too much inventory being left over.

         Barnes and Noble relies partly on debt to help execute their everyday sales. In
analyzing the debt that they are using, it was seen to be more debt used in 2008 in
comparison to 2007. According to Barnes and Noble’s Annual Report, Previous long
term debts have been paid and taken care of. This means that Barnes and Noble has no
long term debt, and has not had any for at least 3 years. Therefore, The total debt for
2007 was 0 compared to 0 in 2008. The Debt to Asset ratio for 2008 was 0% compared to
0% in 2007. This tells us plenty about the debt management in comparison to each year.
The ratio of 0% tells us that there was no need to take on more debt, and actually shows
us that even when Barnes and Noble has a bad year, they are not as effected because their
liabilities are lower because of not having debt. This also tells us that in comparison to
the 2007 year that the company held steady in terms of assets compared with debt since
the assets increased as well. As this company does well, it is obvious that their numbers
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in terms of profit should continue to increase. Since creditors look at these ratios in order
to see if a company will make good on their business loans and obligations, it is
imperative that Barnes and Noble continues to stay debt free.
         The ratios and numbers for the calculations that use the total net income for

Barnes and Noble were easy to determine because of the gains that were recorded for the

2008 year in comparison with the 2007 year. The Net Profit Margin was 2.5% for the

2008 year because the net income was 135 million, and the total revenue was 5.4 million.

The net profit margin ratio for 2007 was also 2.8. This ratio is important for investors

because it tells how much profit is made per $1 of revenue. Because the income was good

in 2007 it is obvious that the profit that was generated was a positive profit, moreover,

there significant profit. The ROI was also positive for 2008 because of the net income.

The return on assets ratio was .04 to 1 for 2008 compared to .05 to 1 in 2007. The ROI is

used to show how well the management at Barnes and Noble is doing to generate income.

It is obvious that in 2008 this job was done slightly better than 2007. For any investor it is

important to know how the management of the company is doing, and it is obvious that

the management at Barnes and Noble needs to continue the things that they are doing

because it is yielding excellent profits. The ROE for Barnes and Noble was also slightly

better. For the 2008 year the return on equity was positive at 503% compared to the ROE

for 2007 which was 505%. In comparison, the 2008 year was much better than 2007

because of the net profits. This comparison shows that the 2008 shareholders earned a

decent amount of return on their investments compared to the 2007 shareholders who

earned, but not as much as in 2008. This is also a great indicator that the same 2007

investors were still investing in this company in 2007. The current price per share as of

03/13/2009 for the Barnes and Noble (BKS) is $18.82 with the earnings per share

currently being 1.61. This makes the price per earnings ratio, or P/E, 11.40. This shows
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how much a shareholder can expect to earn per share, which is a fairly decent amount

currently. Also in terms of the weighted average cost of capital (WACC) for both years

the numbers are pretty similar. The 2008 WACC is 0%, while the WACC for 2007 is 0%.

This is because this company has no debt. Obviously, Barnes and Noble’s operating and

cash cycles are currently optimized and their working capital has been wonderful as they

prosper every year. In saying this, they are definitely doing well.

       Overall, the Barnes and Noble is an admirable and customer-worthy business.

They have been in business for over 125 years, and have continued to improve with every

year. Barnes and Noble has survived the changes in trends and times, successfully

surviving the previous and economic conditions. The economy has made it difficult for

any company in this industry to make a decent profit because of numerous reasons

including gas prices. Nonetheless, Barnes and Noble has found different ideas towards

trying to overcome this slump. Some of those ideas include obvious discounted prices for

books. They have even stayed discounted despite the economic changes. The current

stock price for Barnes and Noble is $18.82 with the 52 week low being $10.77 and the 52

week high being $33.64. The 2008 year has shown positive changes and increases in

comparison to 2007, although the sales went down. Since the current price of the stock is

in the middle of the 52 week low and high, it would not be too risky to invest in this stock

because of how well Barnes and Noble has done in recent years. If the economy starts to

get better, this stock would be an exceptional investment. Moreover, with 2008’s

numbers being even better than 2007, which was also great, and the constant demand for

products and services in this industry, I would have to suggest that an investor watch this

stock and purchase this stock.
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Barnes and Noble (2009). Wiki. Retrieved March 13, 2009 from

Barnes and Noble Financial Reports 2008 (2009). Financial. March 13, 2009


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