The Barnes & Noble Education Spinoff Is A Year Old; How Has The Deal Fared?

It has been just over a full year since Barnes & Noble, Inc. BKS finalized its spinoff of Barnes & Noble Education Inc BNED. On Thursday, shares of Barnes & Noble were trading lower by more than 3 percent while Barnes & Noble Education dipped more than 7 percent after the two companies reported their quarterly results.

So, was the spinoff a success?

As part of the spinoff, Barnes & Noble shareholders received 0.632 shares of the Education entity for each share of Barnes & Noble stock owned.

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Barnes & Noble Education opened for trading on July 23, 2015, at $14.00 per share, while the core-entity opened for trading at $28.62. Following the 6 percent dip in Barnes & Noble Education, the stock was trading at $11.45 while shares of Barnes & Noble were trading at $12.02.

Shareholders who have held on to both stocks since the spinoff are in a worse position today than they were as of July 23, 2015.

Earnings Reports

The rationale behind a business split is simple and was explained by Barnes & Noble Education's CEO Max Roberts:

"As a separate public company, we believe we are well positioned to take advantage of future growth opportunities and enhance our services for our current and future customers."

It is to be assumed that a business split requires some time before the new entity can work out the kinks. Since both companies reported earnings on Thursday, let's take a look at the difference between the two.

Barnes & Noble reported a $0.07 loss in its first quarter on revenue of $913.88 million. Wall Street analysts were expecting the company to lose $0.13 cents per share on revenue of $958.68 million.

Barnes & Noble Education said that lost $0.56 per share on revenue of $239.25 million, while Wall Street analysts were expecting a loss of $0.58 per share on revenue of $246.28 million.

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Barnes & Noble reported a 6 percent comparable store decline for the quarter, which was worse than the 2.8 percent decline the Education entity reported.

The jury may still be out on whether the spinoff was a smart move. For the time being, investors are being punished, but this may be due to the fact that the legacy company continues to shed market share to the online giant Amazon.com, Inc. AMZN.

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