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Barnes & Noble sees strong Nook growth

To match Special Report PUBLISHING/EBOOKS/
To match Special Report PUBLISHING/EBOOKS/

By Phil Wahba

NEW YORK (Reuters) - Barnes & Noble Inc forecast sales of its Nook e-reader and e-books would more than double this fiscal year to $1.8 billion and said book sales would get a lift from the demise of rival Borders, sending its shares up 8 percent

The largest U.S. bookstore chain, which has bet its future on the success of the Nook, reported a narrower quarterly loss on Tuesday as the popularity of the Nook helped mitigate flagging book sales.

Sales of the Nook group of devices, which includes a standalone as well as a touch-screen reader, rose 140 percent to $277 million in the quarter, comprising nearly 20 percent of the company's total sales. That made it a larger business than the College Bookstore chain of 635 stores, where sales fell.

Chief Executive William Lynch told analysts on a conference call that the bookseller has 26 percent to 27 percent of the e-book market, the same market share he claimed last quarter.

In terms of sales, Nook is the No. 2 e-reader after Amazon.com Inc's Kindle. It also competes with Apple Inc's iPad tablet.

If the Nook and the e-books sales it generates live up to Barnes & Noble's expectations, they would account for a quarter of the chain's sales and all of its growth.

Sales at Barnes & Noble superstores slipped again in the fiscal first quarter, ended July 30, as readers continued migrating to e-books. The pain was made worse by Borders' liquidation sales, which are scheduled to end next month.

Barnes & Noble expects sales to get a net bump for the year of $150 million to $200 million as Borders shoppers move to Barners & Noble. Lynch expects stores to see their highest traffic level in five years this holiday season.

Sales at its namesake superstores open at least 15 months fell 1.6 percent during the first quarter, while same-store sales at its College Bookstore chain were down 1.8 percent.

Barnes & Noble reported a loss of $56.6 million, or 99 cents per share, for the quarter, compared with a loss of $62.5 million, or $1.12 per share, a year earlier.

The retailer's shares were up 8 percent to $12.38 in midday trade on Tuesday.

INVESTING IN NOOK

Barnes & Noble put itself up for sale a year ago but attracted only one firm offer -- a bid in May from John Malone's Liberty Media Corp, which ultimately decided to invest $204 million in the company rather than buy it outright.

Lynch said in an earlier statement that Barnes & Noble would continue to invest "appropriately" in the Nook. The money from Liberty will be used primarily to keep the Nook competitive.

With sales of books declining, Barnes & Noble is wise to focus on building up the Nook, an analyst said.

"All the cash flow generation is from the stores, and they're diverting it to the one area of growth: digital books," said Morningstar analyst Pete Wahlstrom.

Barnes & Noble, which operates 704 bookstores, expects total sales of $7.4 billion for the fiscal year, which ends next April, in line with analysts' estimates.

The company expects same-store sales at its bookstores to rise 2 percent to 3 percent for the year, helped primarily by Nook devices and, to some degree, by toys and games. It expects flat same-store sales at the College Bookstore division.

Barnes & Noble expects a full-year loss of 10 cents to 50 cents per share. Analysts on average expect a loss of 16 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Phil Wahba; Editing by Derek Caney, Matthew Lewis and John Wallace)

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