Barnes & Noble reported that store sales for its fiscal second quarter, which ended Oct. 31, fell 2% to $950 million, with same store sales falling 3.2%. The total net loss for the quarter was $24 million (or 43 cents a share), broken down to 30 cents of operating loss and 13 cents attributed to re-acquiring shares in its B&N College Division in late September. (The college division is credited with only $65 million in sales, but the data only includes the one-month post-acquisition period.)
Even the good news, such as rising sales through its online division and the "overwhelming customer demand" for its new e-reader, the Nook, is heavily tempered. Customers who order the Nook now won't get it in time for Christmas, and by ramping up its schedule to meet customer demand, Barnes & Noble says it is "incurring higher production costs than originally anticipated and increasing future investments related to its digital strategy, including additional people, technology and in-store marketing support."
Borders in a Bind
Barnes & Noble also cautions against high hopes for the upcoming quarter, as it expects a 1 to 3% drop in store sales and forecasts full-year earnings per share to be in the range of $0.33 to $0.63 -- way off from its previous forecast of $0.59 to $0.89, and even further removed from the over $1 a share forecast analysts were betting on. As a result, company stock -- already affected by Ron Burkle's buying spree and the poison pill the company enacted as defense -- is taking a massive hit in trading today.
But Barnes & Noble has plenty to cheer about compared to its megabookstore rival. Borders reported a sharp drop in sales, which fell 12.7% to $595.5 million for the second quarter, and an operating loss of $39 million (or 64 cents a share.) Same-store sales fared even worse: Superstore comps were down 12.1% to $493 million and Waldenbooks comps were down 7.2% ($73 million). Most of those Waldenbooks stores are slated to close in January.
As a result, Borders finds itself in a bind with the holiday season fast approaching. It has added almost $17 million in book inventory to prepare for the holiday season, but has reduced total inventory -- mostly from its hemorrhaging DVD and multimedia sections -- by $99 million. And now both companies have significant ground to make up between Thanksgiving and Christmas -- a possibility that seems ever further out of reach, based on Barnes & Noble's expectation that "general retail traffic will remain challenged during the holiday selling season."
