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Barnes & Noble Education CEO on having adaptability to help college students, bookstores

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Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss how students can stay connected this year as college classes switch to online, with Barnes & Noble Education CEO, Mike Huseby.

Video Transcript

ALEXIS CHRISTOFOROUS: A growing list of colleges are going online in the fall as coronavirus cases rise on campus. But what can students do to stay connected and stay on track with their education in this new reality? Joining us now is Mike Huseby. He is CEO of Barnes & Noble Education.

Mike, good morning. I know your company runs a lot of those bookstores we see on college campuses. And, of course, you also sell these books and textbooks online. Just give us a feel for what your business is like right now.

MIKE HUSEBY: Good morning, Alexis and Brian and everybody else. It's great to be with you. The watchword is adaptability, flexibility, and doing whatever we can to help the students, the 6 million students that we serve through the managed contracts we have with the colleges that we serve. We run their bookstores. We run their online education and online purchasing services, as well as provide digital study aids to both schools and directly to students.

So what our business is like right now is we have boots on the ground at every school we serve. We're listening to each and every physical store that we have in the campus. And we're working with them to try to help them adapt as well as they can to these very fluid, as Reggie described and you were talking about earlier, very fluid circumstance.

BRIAN SOZZI: Mike, certainly want to touch more on the school aspect. But amidst all this, you announced that you're working with Morgan Stanley on a strategic review. Why did you make that move? And what are you hoping to achieve?

MIKE HUSEBY: Well, we disclosed in December of last year, Brian, that we were going to do a strategic review. In January, the board hired Morgan Stanley. And as we said at the time, we think we have a great strategy. And I that's been validated during the strategic review, which was started before COVID. And even with COVID, despite COVID, the strategic review continues.

I would say it's winding down. It's been going on for a while. But COVID obviously complicated it. But the primary purpose was to accelerate those growth initiatives, many of which are digital, that are in our strategy, whether it's raising more capital or another structure, whatever the board decides is the best strategic alternative.

ALEXIS CHRISTOFOROUS: We see a number of brick and mortar bookstores just go away. Hard to go up against an Amazon and some of these other online retailers. Is your company, is Barnes & Noble Education somewhat insulated from that because you are such a niche market?

MIKE HUSEBY: We're insulated in a couple of ways, Alexis. It's a great question. First off, we're not a standard retailer. We don't take real estate risk. We have contracts with the university and we give them a percentage of the revenue we earn. So it's in the interest of the university, especially in today's times when they're struggling financially, to try to keep as much of the revenue for not just sales of courseware, but also general merchandise, like sweatshirts and computers and everything that we sell in that-- within that contract.

So we're not a typical retailer. I think the market confuses us with a retailer. We have a retailing heritage, but that's not really what we do.

BRIAN SOZZI: Mike, it's clear that the long-term future for college education will take some form of being in school plus also doing it at home, in whatever capacity. What does that mean, that digital learning experience and the rise of that experience mean for the future of your company?

MIKE HUSEBY: Well, the future is now as far as we're concerned for that question. We developed digital study aids. Check it out. Your listeners should go to or your viewers should go to Bartleby.com. We have a digital self-study aid that helps students any time, anywhere with homework problems or textbook solutions, Q&A.

And we saw a big ramp in that when COVID hit. We had over 200% growth immediately in spring in terms of downloads. We have an app. And we also have a desktop application. But if you're sitting there at midnight and you need help, you can't get it from the school, go on Bartleby.com. They'll help you step through and actually learn how to solve problems, or to help you write a paper, finish it up at night, whatever you're trying to do.

Remote learning is very difficult. It's a very difficult time to be a student or an educator right now. And so we're trying to help them by giving them as many digital tools and virtual tools as we can. And fortunately, this is a strategy we put in three years. And it's all coming to fruition this year than last year.

ALEXIS CHRISTOFOROUS: I'm curious how you're able to compete effectively with an Amazon. I mean, I just went through this exercise of buying books for one of my sons. And when it came time for the textbooks, I got sticker shock. I mean, they typically-- I remember when I was in school, textbooks can be quite expensive.

And it looks as though the margins are pretty squeezed to begin with. And then you have somebody like an Amazon able to sell it at a discount. How are you able to compete?

MIKE HUSEBY: We have a very unique mix of assets, Alexis. We've got a distributor that actually is the largest wholesaler of textbooks in the United States. So they distribute a lot of used books. So we've devised packages with the schools that save students up to 40% to 50% in inclusive access programs. Both physical and digital programs are mixed together. And that's getting a lot of traction right now, as you can imagine.

I mean, our mission is to make education less expensive, more affordable, and better. That's what we're trying to do. And these kinds of techniques, pricing bundles are one way to do it, trying to save students money any way we can. We also match Amazon's prices. And we've done that for several years.

BRIAN SOZZI: Mike, I did quickly want to go back to the strategic review again. Your stock, it's trading at about 75% less than book value. Clearly, there's a disconnect there. Are you open to a sale of the company? What are you hoping to ultimately achieve here to bring that value, or realize that shareholder value?

MIKE HUSEBY: Well, we're open to anything, Brian, that will ultimately enhance shareholder value. As I said, I think the market confuses us with a distressed retailer. It's how we've been valued for some time as we've been going through this digital transformation, ever since I became CEO, which is when it really started, almost three years ago.

I've been through this in other industries. And it takes a while. But we're finally, I'd say, at about the eighth inning of it. And we'll be more aggressive about telling the story.

The stock market, I think-- we had a decline after COVID started, because I think there was a very pronounced belief that anything physical on campus, et cetera, was going to be a disaster for us. We do a lot of other things. As we just discussed, we have digital tools.

Our NBS subsidiary distributes textbooks and fulfills virtually direct to students' homes. We did that in 315 schools this summer, turned it up in two weeks, versus 10 last summer. So we have a very unique kind of set of one-stop-shopping assets for both physical and digital, as well as virtual delivery.

BRIAN SOZZI: All right, let's leave it there. Michael Huseby, CEO of Barnes & Noble Education, good to speak with you. And good luck for the rest of the school season.

MIKE HUSEBY: Thank you all. Stay healthy.