Barnes & Noble to spin off Nook business; misses on loss

New York - Barnes & Noble Inc. plans to spin off its Nook e-reader unit as a separately traded public company from its retail operation by the end of the first quarter of fiscal 2016. The retailer made this decision as its consolidated net loss for the fourth quarter of fiscal 2014 shrank from $114.8 million to $36.7 million, missing Wall Street estimates.

“We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately,” said Michael P. Huseby, Barnes & Noble’s CEO. “We fully expect that our retail and Nook Media businesses will continue to have long-term, successful business relationships with each other after separation.”

During the fourth quarter, Barnes & Noble reported a 3.5% year-over-year increase in revenue to $1.32 billion, from $1.28 billion. However, revenue in the Nook segment declined 22.3% while revenue in the retail and college segments grew, likely influencing the decision to spin off Nook. Nook sales in the fourth quarter only totaled $25 million. Same-store sales dropped 4.1%, with negative impact from declining same-store Nook sales.

For the fiscal year, net loss dropped to $47.3 million from $153.8 million. Sales dropped 7% to $6.38 billion from $6.84 billion. Same-store sales dropped 5.8%. Barnes & Noble expects continued declining same-store sales during fiscal 2015.

Barnes & Noble has engaged Guggenheim Securities LLC as financial advisers and Cravath, Swaine & Moore LLP as legal counsel for its Nook spinoff. The company said it cannot guarantee the separation will occur by the stated deadline and that customary conditions and approvals will apply.

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