Books-A-Million (BAMM), the country's third-largest bookseller, is nowhere near as prominent as competitors Barnes & Noble (BKS) and Borders (BGP), and often flies under the radar of investors. But it faces the same pressures affecting all chain bookstores, what with sales declines of print books and a need for alternative revenue streams to make up for the continued shortfalls -- just without the melodrama of proxy fights and a potential buyout, in B&N's case, or the agony of repeated layoffs and public criticism of new non-book items, as is the case for Borders.

Books-A-Million's earnings report for the third quarter ending Oct. 30 isn't very good, and can't be spun in a very positive light. Not when net sales decreased 5.5% to $104.8 million, from $110.9 million a year ago, the company's net loss for the quarter climbed to $1.7 million, or 11 cents a share (from $1.6 million at this time last year) and comparable store sales dropped 5.8% from the same period 12 months before.

Looking at Books-A-Million's fortunes for the first three quarters combined, net sales are down 2.8% to $341.8 million, comparable store sales declined 4.2%, and net income is actually up a little bit -- $2.2 million, or 14 cents per diluted share, compared with net income of $1.9 million, or 12 cents per diluted share, for the year-earlier period.

Cost-Conscious Consumers Buying Fewer Hardcovers

Chairman, President and CEO Clyde Anderson didn't mince words, singling out the comparable store sales in particular as being "disappointing" in a statement released Thursday afternoon. He added the company "faced a tough comparison to last year's bestseller lineup" and cited another big factor: "a cost conscious-consumer buying fewer hardcover books."

There were, however, "continued positive trends in bargain books and gifts" and looking ahead, BAMM is particularly excited about "our new toy, gift and electronics departments, our entry into the video game business, our expanded offering of DVDs and the introduction of the NOOK range of e-readers, including NOOKcolor."

That last part is what investors and the publishing industry should zero in on. Until they signed a deal with Barnes & Noble to stock the top bookstore chain's e-reading devices, Books-A-Million didn't have a real presence in the digital world. But just in time for the holiday season, the company's customers can walk into stores and take part in the growing e-book market and actually see affordable black-and-white and color e-readers up close. And, hopefully, plunk down some money to buy one.

Books-A-Million, with this deal, stands to reap tidy earnings and profits, while also presumably helping B&N's bottom line as well. As a result, it seems likely that the no. 3 retailer will end fiscal year 2010 on a more positive note, and bring further good cheer into 2011.


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