Barnes & Noble confirms job cuts, expects $40 million in annual cost savings

Key Points
  • Barnes & Noble confirms a new labor model in its stores will result in job cuts.
  • The company will book a charge of roughly $11 million in its fiscal third quarter for severance costs and other related expenses.
  • Barnes & Noble expects $40 million in annual cost savings because of these actions.
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Barnes & Noble confirmed Tuesday that a new labor model in its stores will result in job cuts, but this will help the company save roughly $40 million annually.

The New York-based retailer expects to book a charge of about $11 million in its fiscal third quarter for severance costs and other related expenses.

CNBC had reported Monday afternoon that the company had begun layoffs. Barnes & Noble has not disclosed the number of employees impacted by the news, but it's attributing the workforce reduction to poor holiday performance.

"Given our sales decline this holiday, we're adjusting staffing so that it meets the needs of our existing business and our customers," a spokeswoman told CNBC. "As the business improves, we'll adjust accordingly."

Barnes & Noble said Tuesday that the severance payments will be distributed in full by fiscal 2019.

"The new model will allow stores to adjust staff up or down based on the needs of the business, increase store productivity and streamline store operations," Barnes & Noble said about its actions, in a filing with the Securities and Exchange Commission.

Barnes & Noble wasn't a winner this holiday season, though consumer spending has generally been stronger. Its 2017 holiday sales fell more than 6 percent to $953 million, when compared with the year prior. Same-store sales declined 6.4 percent for the holiday period, while online sales dropped 4.5 percent.

The retailer has increasingly faced pressure from Walmart and Amazon, which have managed to steal a larger share of the book market. Walmart is planning to make a massive push in selling e-books and e-readers on its website later this year. Meanwhile, Amazon is opening up more of its own bricks-and-mortar bookstores.

In turn, Barnes & Noble is still under pressure from an outspoken activist investor.

Last July, Sandell Asset Management urged Barnes & Noble to sell itself, saying the retailer could fetch at least $12 per share. Sandell called the company's real estate "beachfront property" at the time.

Then, having not reached an agreement with Barnes & Noble by November, Sandell proposed to take Barnes & Noble private in a deal that valued the company at more than $650 million, or over $9 per share. The books retailer barked back and called any such deal "highly unlikely."

Barnes & Noble shares were up about 1 percent Tuesday morning, trading around $4.80 apiece. The stock has fallen 55 percent from a year ago.