Barnes & Noble (NYSE: BKS) will probably join Sears and JC Penney (NYSE: JCP) in the retail graveyard this holiday season.
The bookseller reported its seventh straight net loss in a row on October 27, 2018. Barnes & Noble has reported net losses and operating losses for every quarter since 1st Quarter 2017.
Notably, Barnes & Noble recorded an operating loss of -$26.7 million and a net loss of -$27.39 million for 4th Quarter 2018. In addition, Stockrow reports Barnes & Noble’s revenues have been shrinking for eight straight quarters.
Barnes & Noble is losing Money Every Time it opens the doors
In addition, Barnes & Noble recorded an operating cash flow of $-50.17 million and an investing cash flow of -$30.47 million on 27 October 2018.
Thus Barnes & Noble is losing money every time its stores open their doors. That’s reminiscent of Sears which declared bankruptcy in October.
Moreover, it looks as if Barnes & Noble is borrowing money to keep the doors open. For instance, it reported a financing cash flow of $88.04 million on October 27, 2018. In other words, Barnes & Noble borrowed $88.04 million to cover its operating costs.
Is Barnes & Noble for Sale?
Not surprisingly, Barnes & Noble’s management could consider selling the company.
A few potential buyers; including founder and executive Leonard Riggio and a British company called W.H. Smith, have made offers for Barnes & Noble, CNBC reports. However, there is no sign the offers are under consideration.
There are other buyers for Barnes & Noble out there including Amazon (NASDAQ: AMZN). Amazon has the money to buy Barnes & Noble; The Everything Store recorded $29.77 billion in cash and short-term investments on September 30, 2018.
Why Amazon could Buy Barnes & Noble
Moreover, Barnes & Noble is cheap right now. It had a market capitalization of $538.88 million and a stock price of $7.38 on November 28, 2018.
Either Amazon; or book lover Jeff Bezos, could easily buy Barnes & Noble. Saving Barnes & Noble could be great public relations for Bezos. To explain, Jeff could go from the “man who killed the bookstores” to the man who saved them overnight.
The Barnes & Noble stores could be ideal locations for Go Cashier-less convenience stores or small Whole Foods Cafes. Remember, Amazon owns Whole Foods and is planning to open 3,000 Go locations in the US.
Purchasing Barnes & Noble will give Amazon 630 bookstores in the United States. Furthermore, many of those bookstores are in choice locations in big malls and downtown areas. Hence, buying Barnes & Noble can help Amazon Go and Amazon bookstores expand into many new markets.
An obvious experiment for Amazon is a Go/Barnes & Noble hybrid. In detail, the hybrid store will sell books and food in a cashier-less environment. Such a hybrid could serve as a pickup location for Amazon merchandise.
Barnes & Noble is Out of Cash
I think Barnes & Noble will run out of cash this holiday season because it reported just $11.19 million in cash and equivalents on October 27, 2018.
Thus Barnes & Noble does not have enough money to keep operating. All it will take is another quarter of falling revenues, which is probable, to start the death spiral.
The death spiral occurs when a retailer runs out of cash and cannot cover expenses like rent. Generally, retailers liquidate locations when the death spiral begins.
I expect the liquidations at Barnes & Noble to begin in January or February 2019. Additionally, bankruptcy is probable in February or March 2019.
Unless, a white knight like Bezos; or a major publisher, rides in and buys Barnes & Noble. Publishers might save Barnes & Noble because it acts a counterweight to Amazon.
On the other hand, Amazon is now big and powerful, so Barnes & Noble’s existence no longer affects it. Hence, the publishing industry has no incentive to save Barnes & Noble.
Can Barnes & Noble Survive
I think the only way Barnes & Noble can survive is with a buyer. Barnes & Noble will die because its business is unsustainable.
Therefore, I advise investors and speculators to stay away from BKS. As a company and a stock, Barnes & Noble is far beyond turning around. Avoiding it is the best way to keep from losing money in the retail death spiral.