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Media Decoder Blog: Barnes & Noble’s Strategy Is Questioned as Holiday Nook Sales Decline

January 3, 2013 by Leave a Comment

For Barnes Noble, the digital future is not what it used to be.

After a year spent signaling its commitment to build its business through its Nook division, Barnes Noble announced on Thursday that holiday sales were disappointing enough to raise questions about the company’s ability to pull off the transformation from its traditional retail format.

Retail sales from the company’s bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.

“They are not selling the devices, they are not selling books and traffic is down,” said Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers. “I’m looking for an optimistic sign and not seeing one. It is concerning.”

The results, covering a period that ended Dec. 29, are a sobering development for the nation’s largest bookstore chain. The declines occurred during what is supposed to be peak buying season. And the Nook unit’s sagging fortunes came despite a 13 percent increase in sales of digital content, suggesting that it is the tepid demand for Nook devices that is dragging down the unit’s performance. Over all, the numbers underscore the difficult challenge the company faces in an increasingly competitive e-reading market.

Barnes Noble has invested heavily in developing a tablet that can compete with offerings from media giants like Google, Apple and Amazon.com. Last April, in announcing a $300 million investment in Nook by Microsoft, the chief executive of Barnes Noble’s chief executive, William J. Lynch, said the company wanted “to solidify our position as a leader in the exploding market for digital content in the consumer and education segments.”

A few months after that, the bookseller began breaking out the financial results of the Nook division, In October it completed its strategic partnership with Microsoft by creating Nook Media, a subsidiary and a signal that it was ready to ride its digital business into the future.

But while Barnes Noble’s most recent Nooks have won critical praise, they have failed to gain significant traction with consumers.

Other companies do not break out sales of their digital tablets, but Amazon has been saying sales of its Kindle Fire were strong. Analysts say Apple’s iPads also appear to be doing well.

“The problem is not whether or not the Nook is good,” said James L. McQuivey, a media analyst for Forrester Research. “What matters is whether you are locked into a Kindle library or an iTunes library or a Nook library. In the end, who holds the content that you value?”

For an increasing number of consumers, he said, the answer is not Barnes Noble.

Though the company’s stock was down only slightly — falling 2 percent to $14.22 — the reaction in the financial world was unsparing. Analysts stopped short of saying that this was a do-or-die moment for the Nook Media division, but they acknowledged that options for a strong digital future were narrowing.

In a note to clients, SP Capital IQ said, “We think this portends greater market share losses for the Nook over the medium term” and downgraded its recommendation on Barnes Noble stock from hold to sell. Barclays said in a note that the Nook’s precipitous decline was “quite concerning” and “below even our modest expectations.”

The declining retail numbers were also troubling when viewed in the context of a rise in sales among independent booksellers. The American Booksellers Association, which has not yet released official holiday sales, estimated Thursday that its members’ sales would be up about 8 percent over last year.

Barnes Noble executives were not available Thursday to discuss the sales numbers. But a statement from Mr. Lynch indicated that the company was searching for a solution.

“Nook device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday,” Mr. Lynch said. “We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward.”

The most intriguing, and troublesome, question is whether the company can stay in the digital device business at all over the long run. Nook has been expensive to develop and market and the company does not have the hefty financial resources of its competitors.

Other options are strategic partnerships. Microsoft’s investment last spring was seen at the time as a way to promote Nook through a powerful partner. But sales of the Windows 8 operating system have been disappointing and the Nook has been featured as little more than an app among hundreds on the Windows 8 platform.

“It is going to prove to be a missed opportunity,” said Mr. McQuivey of Forrester.

Last month, Barnes Noble announced that Pearson, the British education and publishing conglomerate, was taking a 5 percent stake in Nook for $89.5 million. Analysts said that cash investment was welcome and the partnership with Pearson, a major publisher of educational textbooks, might herald a strategy to move toward dominating an education niche market. Still, that would be a significantly smaller business.

Article source: http://mediadecoder.blogs.nytimes.com/2013/01/03/barnes-noble-reports-tepid-holiday-sales/?partner=rss&emc=rss

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FedEx Profit Drops 12%, Not as Much as Expected

December 20, 2012 by Leave a Comment

Demand for air express shipments has fallen as customers turn to slower, less costly methods of delivering goods. Those declines were partly offset by strong growth at the company’s unit that ships goods by truck.

FedEx reported fiscal second-quarter earnings of $438 million, or $1.39 a share, on Wednesday, compared with $497 million, or $1.57 a share, a year earlier.

Disruptions relating to Hurricane Sandy, which walloped the East Coast late in October and killed more than 130 people, reduced earnings by about 11 cents a share.

Factoring out those charges, profit was $1.50 a share, more than the $1.41 analysts had forecast, according to Thomson Reuters.

FedEx shares closed at $93.20, up almost 1 percent.

As part of its plan to revamp the company, which was announced in October, FedEx plans to reduce its staff. It has extended a buyout offer that it expects thousands of workers in the United States to accept.

The company is aiming to trim costs, particularly at the air express unit, where profit slumped about 33 percent.

The company’s ground business is taking market share from its larger rival, United Parcel Service, a FedEx executive said.

“There is no question that with our value proposition that we are taking some level of share,” said David F. Rebholz, who heads the company’s ground operation, which generates about a quarter of FedEx’s sales. “We’re absolutely winning the game over the long run.”

Revenue rose 4.7 percent to $11.1 billion from $10.6 billion a year earlier.

The company held steady its profit forecast for 2013, saying it expects to earn $6.20 a share to $6.60 a share for the fiscal year through May. In September, FedEx cut that forecast by about 10 percent.

That forecast does not account for the costs of buying out thousands of workers, which could total $550 million to $650 million, the company said.

At the end of its last fiscal year, FedEx employed about 300,000 people worldwide, according to a filing with the Securities and Exchange Commission.

FedEx said shipments relating to the holiday shopping season were on track to set a record.

Article source: http://www.nytimes.com/2012/12/20/business/fedex-profit-drops-12-not-as-steep-as-analysts-expected.html?partner=rss&emc=rss

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Confidence Rises Sharply, but Home Prices Fall

December 27, 2011 by Leave a Comment

A monthly survey released Tuesday shows consumers’ confidence in the economy in December surged to the highest level since April and was near a post-recession peak.

But a separate private report said home prices in most major cities in the United States fell for the second straight month in October.

The New York-based Conference Board said that its Consumer Confidence Index rose almost 10 points to 64.5, up from a revised 55.2 in November. Analysts had expected 59.

The surge builds on another big increase in November, when the index rose almost 15 points from the month before.

Improving confidence is in line with retail reports of a decent holiday shopping season. Still, the December confidence reading is below the 90 level that indicates an economy on solid footing.

Economists watch the confidence numbers closely because consumer spending — including items like health care — accounts for about 70 percent of economic activity in the United States.

Still, the Standard Poor’s/Case-Shiller index showed prices dropped in October from September in 19 of the 20 cities tracked, reflecting the typical autumn slowdown after the peak buying season.

Prices in a majority of cities declined for the second straight month. Before that, they had risen for five consecutive months in at least half of the cities tracked.

Atlanta, Detroit and Minneapolis posted the biggest monthly declines. Prices in Atlanta and Las Vegas fell to their lowest points since the housing crisis began.

Prices rose in Phoenix after three straight monthly declines.

The Case-Shiller index covers cities that hold half of all homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The monthly data are not seasonally adjusted.

David M. Blitzer, chairman of S.P.’s index committee, said steep price drops in cities such as Atlanta, Chicago, Cleveland, Detroit and Minneapolis were particularly worrisome because their gains earlier this season were strong.

“Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness,” Mr. Blitzer said. “These markets were some of the strongest during the spring/summer buying season.”

Americans are generally reluctant to purchase a home more than two years after the recession officially ended. High unemployment and weak job growth have deterred many would-be buyers. Even the lowest mortgage rates in history haven’t been enough to lift sales.

Sales of previously occupied homes are barely ahead of 2008’s dismal figures, which were the worst in 13 years. And sales of new homes this year will likely be the lowest since the government began keeping records a half century ago.

Article source: http://feeds.nytimes.com/click.phdo?i=187edab596b23720ec735a7424bf734e

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Recession Struck Inadvertent Blow for Women’s Equality

October 1, 2011 by Leave a Comment

The progress was bittersweet, however. It happened not because women earned more, but because men earned less, according to an analysis of new Census Bureau data.

Median earnings for men, adjusted for inflation, fell by $2,433 — or 6 percent — from 2007 to 2010, according to the analysis, by the American Human Development Project, a social research organization. Women’s earnings, meanwhile, fell by just $253 in the same period, a drop of 0.9 percent.

For men, it was another sad chapter in the painful tale of the recession, which officially ended in June 2009 and battered them more ferociously than it did women. For women, whose economic fortunes have been on a slow but steady rise relative to men’s since the 1970s, it was a small, if unsatisfying, victory.

“The recession was devastating for men,” said Kristen Lewis, co-director of the project, which is part of the New York-based Social Science Research Council. Women, on the other hand, “have come through it with no significant change in their buying power,” she said.

Some of the recession’s steepest declines were in industries that tend to be dominated by men. Earnings in construction, for example, fell by 5 percent, the analysis found. Meanwhile, median earnings in health care and technical occupations, popular among women, increased by 3 percent.

Median earnings for men were also dragged down by workers who lost jobs or had their hours cut back. (The statistic included any worker ages 25 to 64 who had been working full or part time at any point in the years measured.)

“When you have unemployment go from 5 percent to 10 percent, people are going to have lower annual earnings because they are working less,” said Betsey Stevenson, assistant professor of business and public policy at the Wharton School at the University of Pennsylvania.

The construction industry shed a whopping 1.4 million male workers during the recession, the analysis found. On the other hand, the service sector, which includes some of the lowest-paying jobs, like waitress and housekeeper, added jobs for both men and women. Earnings in the sector declined by 6 percent for men, as they took lower-paying jobs, but stayed flat for women.

Women did not have as far to fall, said Sarah Burd-Sharps, who is co-director of the American Human Development Project with Ms. Lewis. Women are heavily represented at the bottom of the earnings ladder and have lower salaries than men across all occupations. A typical woman in the service sector earned $14,792 last year, compared with $21,104 for a typical man.

But the gap is shrinking. The high-paying fields of management, business and finance gained 376,000 women during the recession, while shedding 119,000 men, according to the study. Women’s earnings in those occupations stayed flat, while men’s salaries dropped 3 percent.

This year of budget cuts does not bode well for women, who are heavily represented in local government jobs, like teaching, Professor Stevenson said.

Even so, in recent months, there has been an uptick in women’s earnings, she said. In early 2010, women’s median weekly earnings were 79 cents for every dollar earned by men. By the second quarter of this year they were at 83 cents. That was all the more surprising because female unemployment, lower than men’s through much of the recession, has now started to rise.

“What you see in these earnings is another step towards financial equality,” Professor Stevenson said.

Article source: http://feeds.nytimes.com/click.phdo?i=28899ea975c4243b48325e65d093beea

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On the Road: Hotel Rates, in Some Cities, Seem Fully Recovered

September 27, 2011 by Leave a Comment

Ah, yes. Puts in perspective the hotel room prices in New York City I found on Sunday as I started making plans for a four-night trip in mid-October. Is it really true that four nights at even a midlevel hotel in Manhattan will end up costing more than three Big Reds?

It is. On Expedia, the total for a Hampton Inn in Manhattan for those four nights, taxes included, was $1,620.96. Don’t even ask about a four-star or higher hotel.

There are two lessons here, the obvious one being that moving away from New York gives you a good appreciation of just how expensive New York is to stay in. The other lesson is that hotel prices in major markets — the markets most frequented by business travelers — are way up.

In fact, hotel rates are up across the board in the United States, as growing demand improves fortunes for the lodgings industry. PKF Hospitality Research recently revised its 2011 forecast for domestic revenue growth for the industry, saying that “it’s tough not to be optimistic” about future growth, despite a stalled economy.

PKF Hospitality Research says that it now expects average room rates in the country to rise 3.2 percent this year. Last year, the other two top industry measures, occupancy rates and revenue per available room, also increased after declines in 2008 and 2009.

In Manhattan, the news has been especially good for the industry, if not for those of us booking a room. In the second quarter, for example, the average daily rate for rooms increased 9.2 percent, PricewaterhouseCoopers, the research firm, found. The upscale hotel segment, by the way, had the biggest increase in revenue per room, up 9.1 percent. (My four-day stay in Manhattan would cost $4,833.52 if I booked the cheapest room listed by Expedia.com for those dates at the Four Seasons New York.)

Naturally, hotels could not be raising prices if demand were not solid. In past recoveries, hotels have typically lagged the rest of the economy. If that’s different this time, perhaps we need to examine what I’ll call the Junior’s Cheesecake paradox.

As reported last week in The New York Times, sales of various nonessential goods are rising as people opt for small indulgences even as the economy languishes. Cheesecake sales are up 22 percent over all. At the Brooklyn landmark Junior’s Cheesecake ($43.95 for the basic cheesecake, with shipping), sales are up again after dropping for the first time ever during a recession.

Cheesecake aside, Robert Mandelbaum, the director of research information at PKF Hospitality, said that the firm’s forecasters were “caught by surprise” by the apparently growing strength of the hotel market, which started a recovery last year. “With high unemployment, incomes going nowhere, low consumer confidence and yet two consecutive years of 7 percent increases in demand, we were like, wow,” he said. “So we spent a lot of time trying to look under this economic disconnect.”

Besides employment, other economic indicators had soured in the three months between PKF’s earlier forecast in June and the current more bullish revision. The nation’s debt was downgraded, the stock market sank and unemployment remained high.

But researchers pried out some other factors related to business travel demand. Keep in mind that the supply of rooms has remained generally in check because of weak investment in new construction.

“You feel sort of awkward using a phrase like ‘have and have-not,’ but it’s the case that while companies may not be hiring new people, they’re spending more on business travel,” Mr. Mandelbaum said.

“Business travelers supported by a corporate budget, or well-off individuals traveling for leisure purposes, were simply not as affected by the recession,” he added.

Of course, there is no guarantee that the hotel recovery is sustainable if the economy takes another downturn. Yes, demand and revenue are increasing, but “whether that translates into capital spending for new construction or significant renovation is the outstanding question,” said Maryam Wehe, the senior vice president for hospitality at the industry analysis firm Applied Predictive Technologies.

Still, there are some tentative signs of new spending. The 2,000-room Marriott Marquis Hotel in Times Square, for example, is undergoing a $39 million renovation that’s scheduled for completion next spring.

On Expedia, incidentally, the cheapest rate at the Marriott Marquis for my four nights in October was $2,533.96. Valet parking for Big Red extra.

E-mail: jsharkey@nytimes.com

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Shares Drop on Weak Monthly Jobs Report

June 4, 2011 by Leave a Comment

The market opened more than 1 percent lower after the report from the Labor Department showed the economy added just 54,000 jobs in May, compared with the rise of 232,000 jobs in nonfarm payrolls in April. The report also showed that the unemployment rate rose to 9.1 percent in May from 9 percent in April. May’s payrolls number was well below the 165,000 forecast by analysts in a Bloomberg survey.

Investors had been digesting weak signals about the economy in the days leading up to the monthly report, with gloomy reports on jobs, manufacturing and auto sales that helped to send stocks down by more than 2 percent this week to their biggest declines in percentage terms since last August.

In another indicator released Friday, the Institute for Supply Management said the service sector of the nation’s economy grew in May for an 18th consecutive month.

After their initial reaction to the jobs report, the three main indexes retraced some ground but never pushed into positive territory.

Shares in the telecommunications and information technology sector led the declines. American Tower fell 5.83 percent to $51.21. Verizon was down 1.49 percent at $35.63, and Sprint declined 4.38 percent to $5.67. Yahoo closed down 2.12 percent at $15.68.

The Dow Jones industrial average was down 97.29 points, or 0.79 percent, at 12,151.26. The Standard Poor’s 500-stock index fell 12.78 points, or 0.97 percent, to 1,300.16. The Nasdaq composite index fell 40.53 points, or 1.46 percent, to 2,732.78.

All three indexes closed the week more than 2 percent lower compared with the previous week. It was the third consecutive weekly loss for the Nasdaq.

The Treasury’s benchmark 10-year note rose 12/32, to 101 6/32, and the yield fell to 2.99 percent from 3.03 percent late Thursday.

The jobs numbers seemed more to disappoint than to surprise the market.

David Kelly, the chief market strategist for J.P. Morgan Funds, said it had been clear that the number would be weak because recent data, particularly for payrolls and initial unemployment benefit claims, had suggested the direction.

“A lot of individual investors are skittish, and they will sell first and ask questions later,” Mr. Kelly said of the expected response. “But for the long-term investors it is better to ask the questions first.”

Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors, said investors were more risk-averse than they were about a month ago and unlikely to carry too much risk over the weekend, which has an impact on pricing.

“We are in an environment where the volatility of the underlying data is increasing,” Mr. Creatura said. “Today being a Friday, and being confronted with some pretty dark employment data, investors should be ready for anything.”

The last time the Dow closed lower for five consecutive weeks was the five-week period ending on July 23, 2004.

But some economists expect the economy to pick up in the latter part of the year.

Mr. Kelly said he expected economic growth to pick up, averaging above 3 percent in quarterly growth rates in the second half of the year compared with the 2 percent he forecast for the second quarter. He said growth was more likely than another recession because of factors including a weak dollar, easy monetary conditions and pent-up demand. Corporate profits are also poised to grow.

“For long-term investors that is still the way I would play this,” he added. “But in the short run this is going to raise a lot of fears about something worse.”

“Because of that, stocks are a better value than bonds,” Mr. Kelly said.

Article source: http://feeds.nytimes.com/click.phdo?i=f3f98cdf9f9973d92828ae76b40cc389

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Advertising: TV Networks Expect a Jump in Spending on Commercials

May 16, 2011 by Leave a Comment

The joy among broadcasters stems from a widespread belief that they will, for the second year in a row, be able to charge a good deal more for commercial time during their shows for the coming season than they were the year before.

Last spring, the networks took in about $500 million to $700 million more in the upfront market — called that because it happens before the season— than they did in 2009.

Now, as executives start this week to share with advertisers and agencies their schedules for 2011-12, they are anticipating a robust gain in ad revenue of $600 million to $800 million from last spring — and, by some estimates, perhaps as much as $1 billion.

Those expectations come despite potential problems like a disruption of the next National Football League season; a slowdown in consumer spending caused by rising prices for gasoline, food and clothing; declines in ratings, particularly among younger viewers; and efforts by digital media to lure away advertisers.

“It is an amazing story that in a weak economy the national television business is strong for the sellers,” said Steven J. Farella, president and chief executive at TargetCast TCM, a leading media-buying agency.

“We have clients in financial services, travel and consumer packaged goods,” he added, “and we have no one feeling as good about this economy as the networks.”

Bill Koenigsberg, president and chief executive at Horizon Media, described this as the annual “silly season, where it behooves the sellers to pound their chests and set expectations incredibly high.”

“If I were in their shoes, I’d probably be doing the same thing,” he said, “but I’m not quite sure I see where the money is coming from.”

Still, marketers in categories like cars, fast food, movies, retailing and telecommunications have been increasing ad budgets in recent quarters. That growing demand has been demonstrated by rising prices for commercials that are bought with less advance notice than the upfront provides, in what is known as the scatter market; those rates have run 20 to 40 percent higher than the same quarters a year ago.

“As a hedge” against those rates rising further, “you’ll probably want to lay down your money” in the upfront market, said Steve Kalb, senior vice president and director for video investments at the MediaHub division of Mullen, because “nine years out of 10, you’re likely to do better in the upfront than in scatter.”

Agreements made in the upfront market also yield benefits not found in the scatter market, among them options to cancel commitments.

Another reason most outlooks call for a strong upfront market is a multiplier effect that networks, advertisers and agencies are beginning to notice: Social media like Facebook, Twitter and YouTube seem to be stimulating renewed interest in watching television, making commercial time potentially more valuable as viewers seek to share with family and friends comments about Hail Mary passes, awful gowns or pitchy singers.

Social media and television “work very synergistically,” said Carolyn Everson, vice president for global marketing solutions at Facebook, because “TV has always been a social medium.”

“TV is about creating ‘water-cooler moments,’ only now they don’t take 12 hours till you’re at school or the office,” Ms. Everson said. “They happen in real time.”

“So instead of saying to advertisers, ‘Why are you spending X on TV when you can spend Y on Facebook,’ ” Ms. Everson said, “we’ll say, ‘If you’re going to be spending X on TV, if you add Facebook and social media you maximize the experience.’ ”

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U.S. Trade Deficit Narrows as Both Imports and Exports Fall

April 12, 2011 by Leave a Comment

The United States trade deficit shrank in February as imports fell more than exports, according to a government report on Tuesday that suggested a slowdown in global demand.

The monthly trade gap totaled $45.8 billion, down from an upwardly revised estimate of $47 billion in January. Analysts surveyed before the report had expected the deficit to narrow to $44.5 billion, from the previously reported January tally of $46.3 billion.

Exports, after rising in each of the previous five months, fell 1.4 percent in February to $165.1 billion. That was led by a $1 billion drop in auto and auto parts exports, with smaller declines for other major categories. Services exports rose just enough to set a record.

Imports, which like exports have roared back from the depths of the global financial crisis in 2008 and 2009, fell a larger 1.7 percent in February to $210.9 billion.

Automotive imports fell $2.3 billion, followed by a $2.1 billion drop in capital goods. Imports of consumer goods rose $2.3 billion in February.

The average price for imported oil rose for the fifth straight month in February to $87.17 per barrel, the highest since October 2008. But that was tempered by the lowest quantity of crude oil imports since February 1999.

The closely watched trade deficit with China shrank 19 percent in February to $18.8 billion, as imports from that country fell and exports to the Asian manufacturing giant rose.

While Beijing could point to the smaller trade gap as a sign its economy was becoming less reliant on exports, America’s trade deficit with China was still 21 percent higher for the first two months of the year.

China’s trade figures released earlier this week showed that in the first quarter of 2011 it ran an overall trade deficit for the first time since 2004.

Though imports to the United States declined in February, a second report by the Labor Department showed the import prices rose more than expected in March to post their largest increase in more than a year and a half, driven by a surge in imported petroleum costs and higher food prices.

Overall import prices rose 2.7 percent last month, a sixth consecutive month of gains, the Labor Department said. The increase outstripped economists’ forecasts for a 2.2 percent increase and followed a 1.4 percent rise in February.

Excluding volatile petroleum and food prices, import prices were up only a fractional 0.3 percent after rising 0.6 percent the prior month. In the 12 months to March, overall import prices surged 9.7 percent, the largest increase since April.

The monthly rise in import prices reflected a 10.5 percent surge in petroleum, the biggest increase since June 2009, which followed a rise of 4 percent in February. Imported food prices increased 4.2 percent, the largest advance since July 1994, after rising 0.7 percent in February.

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