Barnes & Noble Education CFO Eyes More Cuts as Campuses Remain Closed

Thomas Donohue,

the chief financial officer of

Barnes & Noble Education Inc.,

has been slashing costs since the early days of the pandemic. He expects to keep doing so as another semester of remote learning approaches, forcing the campus bookstore chain to keep some of its outlets closed.

The coronavirus pandemic has wreaked havoc on college and university bookstores’ finances as many schools pivoted to online learning and students avoided campuses. College sporting events often took place with few or no fans attending, weighing down sales of T-shirts and other merchandise.

Basking Ridge, N.J.-based Barnes & Noble Education, which operates over 760 stores on college campuses in the U.S., responded with various cost-saving measures, including furloughing and laying off an undisclosed number of employees. The company, which had about 5,500 employees as of May 2—before the layoffs took effect—temporarily closed all of its stores. Fifty-two are still closed due to either state or regional restrictions.

Barnes & Noble Education, which spun off from Barnes & Noble Inc. in 2015, saw its profits fall by 79.1% to $7.5 million during the fiscal quarter ended Oct. 31. Sales dropped by 22.9% to $595.5 million during the period, another bad quarter after sales fell 36.2% in the period ended Aug. 1. While students can order items online, the business remains heavily reliant on revenues generated through its brick and mortar stores.

Some universities across the U.S. expect it will take until the fall of 2021 for students to return to campuses. Health authorities in recent weeks greenlighted two vaccines, but it will likely take time before students receive it.

For Mr. Donohue, this means he has to keep reducing expenses until operations on campus normalize, bookstores and cafes reopen and sales recover. Barnes & Noble Education usually generates most revenue during the first month of a new semester, Mr. Donohue said.

While he doesn’t expect additional job cuts, Mr. Donohue said he is scrutinizing other costs such as fees the company pays to schools. Barnes & Noble Education shares revenues with the colleges that house its stores, and rent payments are usually rolled into the agreements. Barnes & Noble Education in its most recent quarter spent $368.7 million on lease payments. So far, the company hasn’t permanently closed any of its campus bookstores due to the pandemic, he said.

The drop in demand also has created new inventory challenges for Mr. Donohue, said

Ryan MacDonald,

a senior analyst at investment bank Needham & Company LLC. “If they run out of inventory in certain areas, they need to be able to fulfill any sales orders that come in pretty quickly and within a couple of weeks at most,” Mr. MacDonald said.

Despite the cost cuts, Mr. Donohue plans to keep investing in the company’s digital businesses, including its bartleby learning service, which offers homework help and writing resources. Barnes & Noble Education operates 671 customized digital bookstores for colleges and schools, selling, for example, e-book devices and digital media.

Reducing payroll costs and operating expenses has helped the company’s financial results, even though there is still work to do, Mr. Donohue said. Barnes & Noble Education’s selling and administrative expenses fell by $21.4 million for the quarter ended Oct. 31, down 18.9% from the prior-year period. The company hasn’t announced an overall savings target.

Mr. Donohue said he regrets he didn’t lay off furloughed workers earlier to help reduce costs. “We…could have acted quicker,” Mr. Donohue said. “That’s probably my biggest lesson.”

The coronavirus has pushed nearly half of U.S. colleges and universities into some degree of remote learning, a change that’s sending shock waves through small college town economies. WSJ’s Carlos Waters explains. (Originally published Aug. 19, 2020)

Write to Mark Maurer at mark.maurer@wsj.com

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Appeared in the December 29, 2020, print edition as ‘Barnes & Noble Education Faces Cuts, as Campuses Remain Closed.’

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