August 24, 2010 / 1:17 PM / 9 years ago

CORRECTED - (OFFICIAL)-UPDATE 2-Barnes & Noble sees further loss from Burkle

(Company corrects Q2 EPS forecast range to loss of 25 cents to profit of 5 cents, from a loss of 25 cents to loss of 5 cents)

* Q1 loss/shr ex-items $1.02 vs Street view $0.80

* Sees Q2 same-store sales at B&N stores down 1-3 pct

* Online sales, including Nook, e-books, up 42 pct

* Sees Q2 EPS range loss of 25 cents to profit of 5 cents)

* Shares down 2 percent (Rewrites first paragraph, adds CEO quote, byline)

By Phil Wahba

NEW YORK, Aug 24 (Reuters) - Barnes & Noble Inc BKS.N posted a steeper-than-expected quarterly loss and said a proxy battle with billionaire investor Ron Burkle would put it even further in the red this year, sending its shares down 2 percent.

The standoff with Burkle has already raised doubts about Barnes & Noble’s ability to attract buyers after it put itself up for sale earlier this month. [ID:nN22159827]

The top U.S. bookstore chain’s results on Tuesday could add to those concerns as it forecast further same-store sales declines and said it was investing a significant amount of its resources to bolster its digital business.

Barnes & Noble reported a net loss of $62.5 million, or $1.12 per share, for the first quarter ended July 31, compared with a year-earlier profit of $12.3 million, or 21 cents per share.

Excluding items such as litigation costs from the battle with Burkle, the loss was $1.02 per share, deeper than the 80 cents per share that Wall Street analysts had expected, according to Thomson Reuters I/B/E/S.

The bookseller said legal and other costs surrounding the contest would hurt results and lowered its full-year forecast by 25 cents per share to a loss of 25 cents to 65 cents.

Excluding those litigation costs, it still expects full year results to range from break-even to a loss of 40 cents per share, compared to Wall Street forecasts of a gain of 6 cents.

Sales at namesake bookstores open at least a year fell 0.9 percent during the first quarter, and the company said it expected a decline of 1 percent to 3 percent in the current second quarter. For the full year, it still expects same-store sales to be flat to up 3 percent.

COSTLY BATTLE

Earlier this month, Barnes & Noble put itself up for sale after years of sales declines. Chairman Leonard Riggio, who has a 28.7 percent stake, is trying to recruit investors to join him in a bid for the company.

A source familiar with the matter told Reuters last week that the company’s auction could be a drawn-out process and may lean towards a financial restructuring.

Burkle’s Yucaipa Companies firm owns 19.2 percent of Barnes & Noble shares and has sought control of the chain in the past. He launched a proxy battle to nominate himself and two other directors to the board two weeks ago after losing a court challenge to an anti-takeover poison pill.

Barnes & Noble has invested in its Nook electronic reader as it tries to adapt to the industrywide shift to digital bookselling, but has struggled to compete with popular devices from Amazon.com Inc (AMZN.O) and Apple Inc(AAPL.O).

Chief Executive William Lynch said in a statement that Barnes & Noble’s efforts were gaining traction and that the bookseller has a greater market share in digital book sales than in physical book sales.

“All our key metrics on the digital business are well ahead of plan,” Lynch said, adding that people who have bought Nook e-readers spend 20 percent more on books. “The company is allocating significant financial resources to strengthen its digital businesses.”

The company on Tuesday also named two new executives to head up its e-books and e-commerce business.

Online sales, which include the Nook launched in October and e-books, rose 42 percent to $145 million, but only made made up about one-tenth of revenues.

Companywide sales, which reflect last September’s purchase of College Booksellers, rose 20.8 percent to $1.4 billion.

Same-store sales at Barnes & Noble College, which the company bought last year for $514 million from Riggio, its chairman and largest shareholder, were up 2.9 percent during the first quarter. The company said they would be flat in the second quarter.

For the current quarter, Barnes & Noble said it expected results to fall within a range of a loss of 25 cents per share to a profit of 5 cents per share, compared with analysts estimates of a profit of 15 cents per share. (Reporting by Phil Wahba; Editing by Michele Gershberg, Lisa Von Ahn, Dave Zimmerman)

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