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Barnes & Noble shares plunge as Q2 disappoints

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Barnes & Noble (NYSE:BKS) saw its shares plummet Thursday after its second fiscal quarter losses came in below expectations, as weak sales at its stores and higher expenses overshadowed online sales growth.

For the three months that ended October 29, net loss was $6.6 million, or 17 cents per share, as compared to a net loss of $12.6 million, or 22 cents per share, a year ago.

The latest quarter included a six-cent per share loss related to the company's preferred stock dividend, it said.
Analysts were expecting a profit of three cents per share, according to Thomson Reuters.

Total sales edged down 0.6 percent as compared to the prior year, from $1.90 billion to $1.89 billion.

Shares were down almost 17 percent to $14.52 as of 3:01pm ET on Thursday.

Barnes & Noble store sales decreased one percent to $918 million, with comparable sales decreasing 0.6 percent. Physical book sales declined, partially offset by increases in its e-reading NOOK products, the book retailer said.

Meanwhile, the company's college unit sales declined four percent to $768 million, due to a shift from selling new and used textbooks to lower priced, higher margin textbook rentals.

But BN.com sales increased 17 percent over the prior year to $206 million. Comparable sales increased 38 percent, driven by continued growth of digital content sales and purchases of NOOK devices. This unit saw earnings before interest, taxes, depreciation and amortization (EBITDA) losses, however, due to planned product markdowns on the recently-announced NOOK price adjustments, as well as higher advertising costs.

In early November, concurrent with the launch of its new NOOK tablet, the company also announced new low prices for NOOK Color and NOOK Simple Touch, retailing at $199 and $99, respectively.

The consolidated NOOK business across all of the company’s segments, including sales of digital content, device hardware and related accessories, increased 85 percent in the second quarter to $220 million, Barnes & Noble said.

"The launch of NOOK Tablet, combined with the product enhancements to NOOK Color and $99 NOOK Simple Touch, represents the highest-quality portfolio of digital reading products on the market at incredible values,” said CEO William Lynch.

"We expect to sell millions of devices during our third quarter, adding to the millions of current NOOK customers."

For the full year, however, the company said it expects EBITDA to be at the lower end of its previous range of $210 to $250 million, as although the company expects increases in retail earnings, it plans to invest more heavily in customer acquisition activities to fuel NOOK digital growth.

Over the three-day holiday Thanksgiving weekend, the company also said comparable store sales increased 10.9 percent at Barnes & Noble stores, on top of 17 percent comparable store growth last year.

"Based on early sales and traffic results in stores we are encouraged by our prospects for this upcoming holiday," concluded Lynch.

Quick facts: Barnes & Noble Education

Price: 3.43 USD

NYSE:BNED
Market: NYSE
Market Cap: $163.29 m
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