Here’s how Barnes & Noble Education’s cost-cutting initiatives are progressing

By: Jayson Derrick
Jayson Derrick
Jayson lives in Montreal with his wife and daughter, loves watching hockey, and is on a lifelong quest to perfect the… read more.
on Dec 29, 2020
  • Barnes & Noble Education operates nearly 800 bookstores across U.S. campuses.
  • During the peak of the COVID-19 pandemic, every store was closed.
  • Today, around 50 stores remain closed and a return to pre-pandemic learning activity isn't expected soon.

Barnes & Noble Education Inc. (NYSE: BNED) Chief Financial Officer Thomas Donohue told The Wall Street Journal in an interview the company will continue prioritizing cost-cutting initiatives as many schools across the world remain closed.

College campus exposure

Barnes & Noble Education was created in 2015 when the iconic bookstore company split itself into two entities. The core bookstore company was rebranded as Barns Group Inc. (NYSE: B) while BNED consists of the college bookstore business.

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Textbooks can be a lucrative investment, according to a Piper Sandler report from late August.

BNED operates nearly 800 stores within U.S. college campuses, all of which were closed in the early days of the COVID-19 pandemic. Today, 52 stores remain closed while hundreds of others are likely feeling the impact of remote learning.

In the meantime, the company has to lean on its digital business to offset the loss of retail sales. Management isn’t looking to cut costs in its online activities, including its e-book devices, digital media, customized bookstores, and the Bartleby learning service that offers homework help and other forms of guidance.

The company’s physical retail presence isn’t the only challenge that it needs to overcome. Needham analyst Ryan MacDonald told WSJ that Donohue and the rest of the executive team face a new set of challenges in terms of inventory management.

“If they run out of inventory in certain areas, they need to be able to fulfill any sales orders that come in pretty quickly and within a couple of weeks at most,” the analyst said.

Job cuts

The unfortunate reality prompted BNED to furlough and lay off an undisclosed number of workers, according to the WSJ interview. The numbers likely couldn’t support the company’s prior payroll of 5,500 employees.

The company reported a 22.9% sales drop to $595.5 million for the quarter ended Oct. 31. During the same quarter, selling and administration expenses fell by $21.4 million which was well short of offsetting the lost revenue. Donohue told WSJ that looking back he regrets not laying off the furloughed workers sooner to help bleed costs.

“We could have acted quicker,” he said in the interview. “That’s probably my biggest lesson.”

Timeframe for return is unclear

There is no immediate timeframe for when in-person education can return to pre-pandemic levels and BNED’s management team is adapting accordingly by finding ways to cut costs. In fact, the company has no alternative but to continue reducing expenses whenever and wherever it can for the near-term.

Some universities are confident students can return to classrooms in the fall. But young and healthy students are very low on the priority list to receive a vaccine against the coronavirus. 

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