* Nook accounts for 8.5 percent of total revenue
* Same-store books sales drop over Black Friday weekend
* Shares down 9.6 pct
(Adds comments from conference call)
By Phil Wahba
Nov 29 Barnes & Noble Inc said the
quarterly loss in its Nook division increased as the bookseller
increased spending on its e-readers and tablets to keep pace
with larger rivals Amazon.com Inc and Apple Inc
Shares slid 9.6 percent to $14.51 in mid-day trade.
The top U.S. bookstore chain also said on Thursday that
sales growth in its core bookselling business slowed in the
quarter and declined over the Thanksgiving weekend, as the
benefits from last year's liquidation of rival Borders Group
In one bit of sunlight, the company reported that quarterly
sales of its high-margin digital books and periodicals soared.
Nook segment revenue rose 6 percent for the three months
ended Oct. 27, largely on the strength of a 38 percent jump in
sales of digital books, newspapers and applications.
But the company, which operates 689 stores, sold fewer Nook
units at its owns stores.
The Nook business has been a driver of revenue since it was
first introduced in 2009 as readers buy more digital books but
product development and marketing costs to keep the devices
competitive with Amazon's Kindle have made it an expensive
Chief Executive William Lynch told investors on a conference
call that he stuck by his forecast that the Nook segment's loss
would narrow this fiscal year.
Halfway through the fiscal year, the loss has increased 6.1
percent to $108.1 million as the company invested in developing
the devices and prepared for its first international expansion
The new Nook HD and Nook HD+ tablets were launched after its
fiscal second quarter ended Oct. 27, and are taking on the
Amazon Kindle devices and Apple's new mini iPad.
Barnes & Noble said Nook device sales over the four-day
Thanksgiving weekend - one of the busiest times of the year for
U.S. retailers - doubled from last year, helped by promotions by
Wal-Mart Stores Inc and Target Corp.
Both stopped selling Kindles this year. Amazon reported
similar growth for its devices.
"Barnes & Noble is holding on to market share at the expense
of profit," said Morningstar analyst Peter Wahlstrom. The
investments to keep pace with rivals will make it hard for the
Nook unit to turn a profit, he said.
Lynch said Barnes & Noble has hung on to its 25-30 percent
share of the U.S. e-books market.
Nook accounts for 8.5 percent of total revenue. In August,
early in the quarter, Barnes & Noble lowered prices on several
In another worrisome sign longer term, Wahlstrom noted that
same-store sales for books fell over the holiday weekend.
Overall revenue in the quarter slipped 0.4 percent to $1.88
billion, while retail sales, still its biggest segment by far,
fell 2.9 percent to $996 million, hurt by flat same-store sales
and a drop in sales on its website.
Revenue at its college bookstore chain, which generates much
of the cash needed to fund Nook, edged up 0.4 percent to $773
million while same-store sales fell. Barnes & Noble expects
growth in this business to come in part from landing new
On a net basis, Barnes & Noble reported quarterly income of
$2.2 million versus a loss of $6.6 million a year ago.
Factoring in preferred stock dividends and accretion of
dividends on preferred stock, it posted a net loss of 4 cents a
share, compared with a loss of 17 cents a year earlier. On that
basis, analysts expected a loss of 6 cents, according to Thomson
(Reporting by Martinne Geller and Phil Wahba in New York;
Editing by Maureen Bavdek and Leslie Gevirtz)