Barnes & Noble Inc. (NYSE: BKS) trades near a 52-week low after the bookstore company announced its revenue dropped sharply and its losses increased. Barnes & Noble has to find something that it can sell in a brick-and-mortar setting that Amazon.com Inc. (NASDAQ: AMZN) cannot because it does not have physical stores. The answer might be one of the most widely sold products in the United States — the hamburger.
Currently, Barnes & Noble shares trade at just over $9, near a 52-week low, while 52-week high is $19. In its most recently reported quarter, Amazon’s revenue was $894 million, compared to $936 million in the same period a year ago. Management’s outlook was not any better:
For fiscal year 2016, the Company continues to expect comparable store sales to be approximately flat with the prior year. Excluding NOOK products, comparable store sales are expected to increase approximately 1%. The Company also expects full fiscal year EBITDA losses in the NOOK segment to decline versus the prior year.
Barnes & Noble has diversified:
Barnes & Noble stores are open seven days a week, average 26,000 square feet, and feature the best service, depth of selection and comfortable settings, including our cafés where customers can enjoy delicious food and beverages.
Its stores also sell toys and DVDs. However, that is clearly not enough.
There are very few products that are sold in almost every corner of the United States. Among them are hamburgers, which the success of McDonald’s Corp. (NYSE: MCD) and its rivals show. Locations can be expensive, but Barnes & Noble already has them. And labor is cheap. Barnes & Noble already has experience with logistics and a number of regional warehouses that feed products to its retail outlets. Amazon has no way to build a similar business.
Of course, it would be absurd for Barnes & Noble to become a company that sells large volumes of fast food. The adaptation of its stores and marketing costs would be too expensive. Barnes & Noble does have to find some set of products and services to seriously augment its current ones, ones that cannot be matched by Amazon, or forecasts of its demise become more likely.
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