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J.C. Penney and Barnes & Noble Earnings — Amazon Wins Again

Douglas A. McIntyre

Investors seems to believe that J.C. Penney Co. Inc. (JCP) showed signs of life when it released earnings, and that Barnes & Noble Inc. (BKS) admitted it was doomed. No matter which side Wall Street takes of either case, all of the evidence shows that neither has made any advance against its real enemy -- Amazon.com Inc. (AMZN)

J.C. Penney advocates were cheered because same-store sales slid "only" 11.9%, while revenue crashed from $3.02 billion in the same quarter a year ago to $2.66 billion. (Also unmentioned was that the year-ago quarter was down more than 20% from the one before it.) The astonishing news was that:

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Online sales through jcp.com were $215 million for the quarter, down just 2.2% when compared to the same period last year

The drop is unfortunate. The phenomenally small contribution of e-commerce in an age of retail e-commerce is stunning. Even if J.C. Penney makes a comeback of sorts, the part of its business that absolutely has to work does not.

Barnes & Noble has been considered the original competitor to Amazon since Jeff Bezos launched it as an online bookstore in 1995. For several years, there was a reasonable debate about whether an online book business could beat a traditional one. Once the answer was clear, Amazon had broadened its inventory to areas from coffins to consumer electronics. Barnes & Noble was hardly all alone. It had lagged to the rear with other powerful retailers like Best Buy Co. Inc. (BBY).

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The long, drawn out war between the book company and the world's largest e-commerce company finally has drawn to a close. Even the founder and chairman has passed on the opportunity to double down:

The company said its Chairman, Leonard Riggio, has advised the Board of Directors that he has suspended his efforts to make an offer for the company’s Retail business. Mr. Riggio expressed a plan to make such an offer when he amended his Schedule 13D on file with the Securities and Exchange Commission in February.

In an amended SEC filing today, Mr. Riggio said, “While I reserve the right to pursue an offer in the future, I believe it is in the company’s best interests to focus on the business at hand. Right now our priority should be to serve the more than 10 million customers who own NOOK devices, to concentrate on building our Retail business, and to accelerate the sale of NOOK products in our stores, and in the marketplace.”

No one had to go beyond the same press release in which Riggio made his declaration:

The company reaffirms its previously issued full-year guidance, in which it expects Retail comparable store sales to decline in the high single digits and College comparable store sales to decline in the low single digits. The company also expects full-year Core Retail comparable bookstore sales to decline in the low- to mid-single digits.

Decline, on top of decline.

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