Barnes & Noble (BKS) the largest book retailer in the country, reported its fourth quarter and full-year earnings late Monday. The good news was that the digital side, helped by sales of its Nook e-reader, was in the black. The bad news was that the company's e-book growth came at a cost: the brick-and-mortar side stayed in the red and shows no signs of moving into profitable territory in 2011.

First, the news from the actual stores. Total sales for the fourth quarter ending May 1 were $1.3 billion, a 19% increase from the same point a year ago, and $5.8 billion for the full year - but only $45 million of pre-tax profit. Total B&N store sales were $962 million for the quarter and $4.3 billion for the year, dropping 3% and 4.8%, respectively. The company reported a consolidated Q4 net loss of $32 million, or $0.58 per share, but for the year, reported net earnings of $36.7 million, or $0.63 per share.

Both of those figures were in line with B&N's previously issued guidance of between $0.85 and $1.15 a share, and the Q4 loss would have been even worse - $0.89 a share - had there not been some tax benefits taken into account. That's small comfort for Wall Street, which estimated a net loss of $0.44 a share. Things were far rosier on the BN.com side, which includes e-book sales and the company's bestselling e-reader Nook. Digital sales increased 51% to $141 million for the quarter and jumped 24% to $573 million for the year.

"The explosive growth of digital books has created the most compelling opportunity in Barnes & Noble's history" said chairman Leonard Riggio in the accompanying statement. "We have found that Barnes & Noble Members, our best customers, have increased their combined physical and digital spend with us by 17 percent since purchasing a NOOKTM, and by a phenomenal 70 percent in total units." CEO William Lynch added, "In fact, in just a brief 12 months since we launched the Barnes and Noble ebookstore, our share of the digital market already exceeds our share of the retail book market."

Looking ahead to 2011, B&N expects to increase full-year consolidated sales somewhere between 20% to 25% (with a 3% bump expected for Q1), EBITDA forecast to be between $235 million to $275 million, and BN.com sales rising 75% to $1 billion and 30-50% for the quarter. The company is careful to note their estimate "reflects the actual retail selling price for eBooks sold under the agency model rather than solely the commission received."

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