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Books are Not the Answer

David Becker
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Books are Not the Answer

Barnes & Noble (NYSE:BKS) is feeling the pressure of declining margins and increasing costs at its brick and mortar locations. The company operates as a content, commerce, and technology company in the United States. The company operates in three segments: B&N Retail, B&N College, and NOOK.

Barnes & Noble is making its last stand in towns just like Chestnut Hill. Its 663 stores still stretch across all 50 states, but there are 63 fewer than five years ago. Stores in Georgetown and the heart of Greenwich Village have closed. Gone, too, is the rambling college store in Manhattan’s Flatiron district that was the sole Barnes & Noble retail property when Leonard Riggio bought that business in 1971.

The 52-week range of BKS is $12.59- $23.71, and the stock hit a fresh 52-week high in March of 2014. Earnings declined 15% year over year. Sales were down 10% year over year and the three year growth rate of sales was down 3%.
Recent insider sales should give investors’ pause. Chairman of the Board Leonard Riggio sold 3,700,000 shares of this bookseller for $17.30, generating $64 million from the sale. This was a privately negotiated block trade. There have been no insider purchases of the stock in 2014.

The technical picture shows stock that is under pressure but seem to have held initial support near the 200-day moving average at $16.16. The stock will likely trade in a tight range until it drops lower. Resistance is seen near the 50-day moving average near $19.15. Momentum on the stock is negative as the MACD (moving average convergence divergence) index prints in negative territory with a downward sloping trajectory. The RSI is printing near 36, which is on the lower end of the neutral range.

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