Harry Potter magic spells losses for booksellers

By Justin Grant

NEW YORK (Reuters) - Harry Potter has no spell for bookstore profits.

Millions of people will descend on stores for a copy of "Harry Potter and the Deathly Hallows" in July, but deep discounts mean many will struggle to turn a profit from the jamboree.

"Everywhere you go there is huge, ridiculous discounting by the chains," said Graham Marks, children's editor at the British-based trade magazine Publishing News.

"They are literally not going to make one penny out of the book. It is stupid -- just throwing money away ... The world has gone mad."

Online retailer Amazon.com and Wal-Mart Stores Inc. have slashed nearly 50 percent off the book's $34.99 list price, forcing many independent booksellers to follow suit to stay competitive.

Barnes & Noble Inc. and Borders Group Inc., the world's largest booksellers, are selling it at 40 percent off.

Such price cuts drive sales, but usually result in minimal profit margin, something Jefferies & Co analyst & Co. analyst Tim Allen said typically happens on every bestseller.

"It's so discounted, there's minimal, if any, gain," Allen said. "Retailers try to make up the shortfall by marketing loyalty cards, which they hope will entice shoppers back into their store."

The conclusion to J.K. Rowling's saga about the boy wizard's battles with the forces of evil could be among the fastest-selling books in history, and some large retailers have broken records for orders well ahead of its July 21 release.

Amazon.com boasted more than 1 million advance orders for the book, easily besting advance orders for Rowling's 2005 release, "Harry Potter and the Half-Blood Prince."

In April, Barnes & Noble said advance orders for "Deathly Hallows" topped 500,000 copies, breaking the bookseller chain's record for advance sales.

But with widespread discounting biting a gigantic chunk out of any potential profits, many booksellers are not enthused about its release. And for smaller, independent book stores, the discounting makes for a hard calculation.

"The bookselling trade has lost millions by having to discount Harry Potter as heavily as they do," said Caroline Horn, children's editor at Bookseller, a British trade magazine.

"A lot of independent bookstores won't be selling Potter. They say it would be cheaper to buy it from a supermarket than the publisher."

The Chapter One Bookstore, an independent bookseller in Hamilton, Montana, is selling the book at full price and donating $7 of each sale to a library of the buyer's choice.