Barnes & Noble Inc.BKS

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

Over the past decade, Barnes & Noble has shown itself to be the superior operator in the book superstore category by generating steady top-line growth and healthy margins that far surpass its peers'. Nonetheless, we believe stiff competition from Read more

Bulls Say

Barnes & Noble is the leading bookseller in the U.S. Its broad selection of books and wide range of amenities, which include cafes, comfortable reading chairs, and literary events, are tough to match.

The bookstore business is generally stable for the retail world, with relatively predictable margins and revenue growth.

If Borders' turnaround fails, Barnes & Noble would likely benefit by increasing its market share. Read more

Bears Say

While we think that Barnes & Noble has a competitive advantage in the book superstore niche, the company has little pricing power, and switching costs for consumers are negligible. We therefore don't think the firm has an economic moat, even though it's an industry leader.

More than half of Barnes & Noble's assets are in slow-moving inventory. This, combined with low operating margins, makes it difficult to generate substantial returns on invested capital.

The book business is competitive. In addition to Borders and Amazon, Barnes & Noble competes with general discount stores such as Wal-Mart and Target TGT, and warehouse clubs such as Costco.

Books are a highly discretionary purchase, and while these are typically low-cost purchases, the whole industry could suffer during an extended or severe economic downturn. Read more

Strategy

Barnes & Noble has grown by building giant stores with coffee bars and other amenities. Given that growth in the book business is unlikely to crack the double digits, key goals are gaining market Read more

Management

Chairman Leonard Riggio took over Barnes & Noble in 1971 and built it into the nation's largest bookseller by pioneering the book superstore concept. His younger brother Stephen, a board member since 1993, was named CEO in February 2002. The Riggio Read more

Profile

Barnes & Noble is the largest bookseller in the United States. As of August 2009, the firm operated 724 Barnes & Noble bookstores and 50 mall-based B. Dalton Bookseller Read more

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