Posted by: Schuyler R. Thorpe | July 10, 2011

Barnes & Noble Quarterly Loss Much Larger Than Expected

Barnes & Noble 4Q loss larger than expected

NEW YORK – Barnes & Noble reported a larger fourth-quarter loss than analysts expected Tuesday as the bookseller continues to invest in its e-book reader Nook and as liquidation sales by rival Borders hurt its revenue.

The results come as the largest U.S. specialty book retailer considers a $1 billion takeover offer from cable mogul John Malone’s Liberty Media Corp. Barnes & Noble declined to give 2012 guidance as it considers the bid.

Barnes & Noble has been spending heavily on its e-book readers and e-bookstore in an effort to stay afloat in how people read books and tough competition from discounters and online retailers that brought down its chief rival Borders Group. Borders filed for bankruptcy protection in February.

Barnes & Noble’s net loss came to $59.4 million, or $1.04 per share, for the three months ended April 30. That compares to a net loss of $32 million, or 58 cents per share, a year ago.

Analysts expected a loss of 91 cents per share, according to FactSet.

Revenue rose 4 percent to $1.37 billion from $1.32 billion last year. That fell slightly short of the $1.39 billion analysts expected. Revenue in stores open at least one year fell 2.9 percent.

The measure is considered a key gauge of a retailer’s financial health because it excludes stores that open or close during the year.

The company says results were hurt by Borders’ liquidation sales at 200 of its stores. Longer term, however, Barnes & Noble expects to benefit from the store closings.

CFO Joseph Lombardi said in areas where a Borders store has closed, nearby Barnes & Nobles are recording revenue increases in stores open at least one year.

Analysts have speculated over the possibility of some combination of Borders and Barnes & Noble as the industry consolidates. But Lombardi dispelled that idea.

He said in a statement that over the past 5 years, before Borders filed for bankruptcy court protection, Barnes & Noble considered buying it “many times” but always came to the conclusion it wasn’t interested.

“We are still not interested,” he said.

Although store revenue fell, revenue from other sectors rose. Online revenue rose 54 percent to $217.3 million and college bookstore revenue rose 4 percent to $211.2 million.

The revenue results show the diverging trends in book retail — physical store sales fell while online sales rose.

But the two aren’t as separate as they may appear, said Simba Information senior trade analyst Michael Norris.

“The physical stores are the cyclists shielding the team leader from the wind,” he said. “There’s no way on this planet that bn.com would have grown as much as it did without the bookstores performing as Nook showrooms for the past year.”

In terms of e-books, CEO William Lynch said the company estimates it added 1 to 2 percentage points to its U.S. market share, bring its total to 26 percent to 27 percent.

For the full year, the company reported a loss of $73.9 million, or $1.31 per share, compared with net income of $36.7 million, or 63 cents per share.

Revenue rose 21 percent to $7 billion from $5.81 billion last year.

The company introduced a new $139 Nook that began shipping in June and also offers a NookColor for $249.

Barnes & Noble is also revamping its merchandise selection at physical stores, in particular adding more toys and games.

Lynch predicts toys and games will become “a very sizeable business for us within a reasonably short time horizon.”

Barnes & Noble operates 705 bookstores and 636 college bookstores in the U.S.

Shares fell $1.20, or 6 percent, to $18.94.

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