Barnes & Noble loss worse than expected, shares fall

By Brad Dorfman

CHICAGO (Reuters) - Barnes & Noble Inc (BKS.N) on Thursday posted a bigger-than-expected quarterly loss and lowered its full year forecast as a weak economy hurt demand for books and music at the largest U.S. specialty bookseller.

The company also cut back on its 2009 store opening plans and its shares fell as much as 18 percent to their lowest level in more than 13 years before paring much of the loss.

"They are doing a good job in running the business on a day-to-day basis," Morningstar analyst Joseph Beaulieu said. "There's not much they can do about consumer sentiment."

"Probably the biggest problem, especially in the month of October was all the financial news was really putting the fear of God into everyone and people just stopped shopping," he said.

Comparable-store sales, a key measure of a retailer's business, fell 7.4 percent in the quarter. Music sales were down much more than overall comparable-store sales.

Standard & Poor's Equity Research said it expected the company to post sales weakness throughout next year.

U.S. booksellers have seen low demand for books in the economic downturn, as consumers turn to essentials like food and gasoline and cut out other spending.

"A significant drop-off in customer traffic and consumer spending impacted our business in the third quarter," CEO Steve Riggio said. He added that the company is taking steps to reduce expenses for the rest of the year and next year.

There were also fewer highly anticipated bestsellers in the quarter compared with 2007 when Alan Greenspan, John Grisham, Ken Follett and Stephen Colbert all had new books out.

Sales of adult bestseller hardcover fiction and nonfiction were down compared with the year-ago quarter, Chief Financial Officer Joseph Lombardi said.

FEWER STORES, FEWER MARKDOWNS

Barnes & Noble plans to open only 15 new stores in 2009, down from its original plan of 20-25 stores, the company said. It now expects 2008 capital spending to be $190 million to $200 million, down from its last forecast of $210 million to $220 million.

The company has also reduced markdowns as a percentage of sales, which, along with improvements in its distribution system, have helped margins.

Barnes & Noble posted a net loss of $18.4 million, or 34 cents per share, in the third quarter ended November 1. That compared with a year-earlier profit of $4.4 million, or 7 cents per share.

Excluding a charge to reduce the value of some store locations, the loss was 21 cents a share. Analysts on average forecast a loss of 16 cents a share, according to Reuters Estimates.