Yes ideally I would prefer to own AMZN here if the two companies were selling for the same price, but that is far from being the case. I’d like to know how you get to your FCF and CROIC numbers… do you use only the maintenance CapEx here or do you include the growth CapEx as well? BKS has been opening a large number of stores until the last couple of quarters. A lot of that money would not be necessary were we to assume that the company would stop growing (as explained in Greenwald’s book).

It seems to me that $320M FCF p.a. is not far fetched for at least the next two years if the company stops opening new stores as they said they would (depending on how much additional investments they decide to make in the digital/ebook business). This would lead to a 29% yield on the current enterprise value of $1104M. That seems rather very cheap compared to AMZN and companies in other industries.

I take all capex off to get FCF, looking at 10 years. If capex is steady, D&A is much lower, I will use D&A instead for maintence. CROIC is agaisnt owner earnings over 10years, bit strict maybe. CROIC against FCF was 20% last qtr, v good.

Anyway I do agree the stock is undevalued, if they stop spending and this is my main point, the economy will continue to grow, this is very important for consumer discretionary going forward and with low margins it is vital, I simply don’t like the margins.

Yes ideally I would prefer to own AMZN here if the two companies were selling for the same price, but that is far from being the case. I’d like to know how you get to your FCF and CROIC numbers… do you use only the maintenance CapEx here or do you include the growth CapEx as well? BKS has been opening a large number of stores until the last couple of quarters. A lot of that money would not be necessary were we to assume that the company would stop growing (as explained in Greenwald’s book).

It seems to me that $320M FCF p.a. is not far fetched for at least the next two years if the company stops opening new stores as they said they would (depending on how much additional investments they decide to make in the digital/ebook business). This would lead to a 29% yield on the current enterprise value of $1104M. That seems rather very cheap compared to AMZN and companies in other industries.

It may prove to be a good contradictory call here.

I would rather buy amzn on a downturn in the stock market which we may be experiencing or we may not and things could hold together, growth continues and Barnes should become profitable through growth in the economy. I like their business model and I believe more could be done if they think creativly(better coffee experience & quality gifts, better layout in these area’s)
Browsing a book store as to be the #1 shopping experience for most people.

Margins, margins though,
Inventories and SG&A only take up 50% right off the bat
Nett income as never exceeded 3%
Croic never exceeded 10%
FFC 7% highest ever, in the economic boom of 05
Owners FFC 2% in the same boom in 04(-7% over 10 years)

not strong enough, it does not through off enough cash.

Personally I would prefer the industry leader if stocks continue to decline or a business with better margins in another industry

It is true that BKS has a considerable amount of operating leverage and that its net margin suffers whenever sales go down. I believe that you have to keep in mind however that we just went through a difficult economic period at the same time as investments in the new e-book reader were being made, leading to additional SG&A expenses. Acquisition-related costs and property write-downs also came into play over the last year and a half. As a result, I don’t think you can really extrapolate what happened over the last two years into the future.

In addition, D&A expenses are much higher than what is actually required in maintenance expenses. I think it is better in this case to look at the FCF numbers which, although volatile, reflect a better picture of the company’s potential. The CEO just recently said that he expects the number of stores to remain flat over the next two years and I think we can expect a lot of cash to come in over that time. The B&N College acquisition did hurt the balance sheet but with no long term debt, it is still in very good condition (especially compared to Borders).

Finally, regarding AMZN, they have probably already been putting all the pricing pressure they can, even selling some of their ebooks at a loss! A good portion of their margin comes from the other types of products that they sell. It is definitely a threat but in my opinion, not as a big as the market makes it to be.

1.5% nett income is 60% drop from last and stagnent/failing for the last 4years.
free cash is down 20% from last Owners down 48%.decreasing for the last 3years
Balance sheet looks ok at SE at 921mil, but they only have 281cash (recievables 81mil), accounts payable and accurred lias are 1.4bil

I like the business model, I think it is still viable, but If I was Amazon and looked at there finacials I would inflict more pricing pressure on them big time, with amazon’s 2.5 times higher net profit and FCF & onwer earnings double from last years @1bil & 2.9bil.

Barnes, needs the economy to keep going and it could well do it and valuation could be met, but at these margins and this cash level, to risky