Barnes & Noble Reports Loss

This was larger than expected for Barnes & Noble, Inc. (NYSE:BKS) shareholders.Barnes & Noble, Inc., the world’s largest bookseller, today reported sales and earnings for the third quarter ended November 1, 2008. In addition, the company also announced that its Board of Directors declared a quarterly cash dividend of $0.25 per share for stockholders of record at the close of business on December 10, 2008, payable on December 31, 2008.

Sales for the third quarter were $1.1 billion, a 4.4% decrease compared to the prior year. Barnes & Noble store sales decreased 4.4% to $971 million, with comparable store sales decreasing 7.4% for the quarter. Barnes & Noble.com sales were $109 million for the quarter, a 2.0% comparable sales increase compared to the prior year.

Bestselling titles during the quarter included Stieg Larsson’s The Girl with the Dragon Tattoo, Alice Schroeder’s The Snowball, Thomas L. Friedman’s Hot, Flat and Crowded, Maya Angelou’s Letter to My Daughter and Vince Flynn’s Extreme Measures. The third quarter net loss was $18.4 million or $0.34 per share. Included in the third quarter results was a non-cash after-tax impairment charge of $7.0 million, or $0.13 per share, to reduce the asset carrying value of certain store locations in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” Excluding this charge, the third quarter net loss was $0.21 per share. Last year, the company recorded an after-tax store impairment charge of $3.5 million in the fourth quarter.

For the thirty-nine weeks ended November 1, 2008, the company had a net loss of $5.2 million as compared to net income of $20.8 million in the prior year. The net loss includes the third quarter charge noted above as well as a $5.0 million after-tax charge from the first quarter relating to a tax settlement. Excluding these charges, the company achieved net income of $6.8 million year-to-date. “A significant drop off in customer traffic and consumer spending impacted our business in the third quarter," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. “In a challenging environment with a comparable store sales decline of 4.6% this year, the company has aggressively managed expenses to operate profitably. Furthermore, the company is taking measures to reduce expenses for the balance of this year and next.” “On a positive note,” continued Steve Riggio, “our gross margins continue to hold up well. We have scrupulously avoided driving unprofitable top line sales growth with additional coupon promotions and extra discounting.

Additionally, the company remains focused on producing cash flow. We are managing our working capital efficiently, which is evident in the reduction of $107 million of inventory compared to last year. The company expects to have no borrowings at year end under its $850 million revolving credit facility. Maintaining a strong balance sheet remains a major priority in this negative economic cycle.”

GUIDANCE - While it is difficult to forecast sales with any certainty in the current retail environment, the company is reducing its full year sales and earnings forecasts based on the negative sales trends to date. For the fourth quarter, the company expects comparable store sales at Barnes & Noble stores to decline 6% to 9%. Fourth quarter earnings per share is expected to be in a range of $1.40 to $1.70. For the full year, the company now expects comparable store sales at Barnes & Noble stores to decline 5% to 6%.

Full year earnings per share is expected to be in a range of $1.30 to $1.60, compared to previous guidance of $1.70 to $1.90. Borders Group (NYSE:BGP) reports 12/2.