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Barnes & Noble's unlikely survival story continues


Barnes & Noble (BKS) shares are on fire after the company reported it managed to scrape together better than expected earnings despite declining revenues. Sales came in a $2 billion, down about 10% year-over-year but earnings per share actually rose to 86-cents a share. Wall Street analysts expected $2.01 billion on the top line and EPS of 51-cents.

Shares are up more than 11% in five days on a combination of today’s earnings and a rather blurry bid for a controlling interest of the company. The potential white knight bidder in this potboiler is 32-year old fund manager Michael Glickstein. Glickstein’s G-Asset fund bid $22 a share for 51% of the company last week. In interview over the weekend Glickstein conceded his firm doesn’t have the cash on hand for its proposal, but he’s confident his plan to turn the company around would make financing a cinch.

Glickstein’s big idea is to chop Barnes & Noble into three separate parts. It’s not a new plan, last year founder Len Riggio proposed something similar but that doesn’t mean there isn’t potential. Barnes & Noble’s 3 distinct operating divisions are the traditional stores, college bookstores and the Nook.

As is immediately apparent the NOOK is an unmitigated disaster but the stores are making money on an EBITDA basis. Not much money, but enough to give it some hope. Core retail same-store-sales declined a mere .5% and the College segment had declining sales but managed to increase EBITDA by almost 4%.

It’s not exactly a miracle of retail operations but Barnes & Noble isn’t quite as close to insolvency as traders thought heading into this morning’s report. In the world of Wall Street “better than expected” can be good enough for a trade. Based on shares of Barnes & Noble that seems to be the story today.

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