Barnes & Noble, Inc. (BKS): End of the Road or a New Beginning?

Yet the legacy retail business is surprisingly healthy. Retail segment EBITDA grew 16% to $374 million in the recently ended fiscal year, despite a 3.4% comparable-store sales decline. The college segment posted a slight EBIDTA decline from $116 million to $111 million.

Many people still prefer physical books and enjoy the atmosphere of Barnes & Noble stores. Furthermore, with the demise of Borders, the company has no competing national bookstore chain. Barnes & Noble is also slowly paring down its store base; it closed 16 stores last year and plans to continue at that pace for the next few years. All of these initiatives could help the company remain profitable for the foreseeable future, in spite of the pressure from Amazon.

Foolish bottom line
Based on Barnes & Noble, Inc. (NYSE:BKS)’s recent results, it appears that there’s still plenty of money to be made selling physical books in retail locations. That said, it’s undeniable that this is a business in decline. Comparable store sales are falling, so the company will have to continue closing stores to keep traffic up at the remaining locations. The best-case scenario for the Barnes & Noble retail division is probably that it treads water for a while, giving investors time to squeeze out some more cash.

That said, I wouldn’t consider investing in Barnes & Noble until there’s some more clarity on what the company plans to do. While there may be some value left in the retail business, it depends heavily on how quickly the business continues to decline; comparable store sales declines are actually expected to accelerate in the coming year. Moreover, if the company pours all of its retail earnings into the floundering Nook segment, it won’t do shareholders much good. As a result, investors should probably avoid Barnes & Noble.

The article Barnes & Noble: End of the Road or a New Beginning? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends and owns shares of Amazon.com.

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