Why Barnes & Noble Stock Popped Today

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of Barnes & Noble  were looking smarter today, jumping as much as 10% after the company announced in its fourth-quarter earnings report that it would separate its Nook media unit from the core bookselling enterprise.

So what: Several analysts had called on the bookstore chain to ditch the flailing e-book division, a move the company had long considered, and today it complied, reaping cheers from Wall Street. The Nook was once seen as B&N’s savior, but the unprofitable e-book unit is now dragging on an otherwise profitable retail chain, and Nook sales fell 22% in the fourth quarter of 2013. The Nook will become a separately traded public company by March 30 of next year.

Now what: Chief Executive Officer Michael Huseby said the decision gave the company the “best chance of optimizing shareholder value,” and that the soon-to-be separate companies will maintain a close relationship. Meanwhile, in its earnings report, Barnes & Noble said revenues increased 3.5% to $1.3 billion, while its adjusted net loss improved from $2.07 a share to $0.96. For fiscal 2015, which ends next May, management expects a low-single-digit decline in sales, but the significant decrease in losses is certainly a positive sign for the bookseller. With the Nook now on its own, a profitable Barnes & Noble seems more likely, but there are still significant challenges for the company to overcome before I’d bet on this stock making a full comeback.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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