Barnes & Noble takes online hit

Barnesandnoble.com's operating losses lead to worse-than-expected third-quarter results.

2 min read
Barnes & Noble, the world's largest retail bookseller, today reported a wider-than-expected fiscal third-quarter loss thanks to operating losses at its Web unit that offset surging sales from the company's retail superstores.

The company posted a loss of $4.59 million, or seven cents a share, while a consensus of analysts expected a loss of three cents per share, according to First Call. Still, the bookseller said sales at barnesandnoble.com rose to $17.2 million or 330 percent from the year ago quarter and 38 percent from the previous quarter.

"We were expecting this loss from barnesandnoble.com," said Donald Trott, an analyst at the investment banking firm of Brown Brothers Harriman. "It's a startup Internet business and as we know most Internet marketers don't make money.

"Probably the earliest they will make money is the year 2001," he added.

Barnes & Noble posted consolidated sales of $674.1 million for the quarter ending October 31, up 9.6 percent from $614.8 million a year ago. Barnes & Noble superstore sales surged 10.9 percent to $554 million from $499.7 million and accounted for over 82 percent of consolidated sales.

Barnesandnoble.com's operating loss for the quarter was $20.5 million, which resulted in a net loss of $12.1 million or 18 cents per share.

Through October 31, the company said barnesandnoble.com had more than 930,000 customers in 177 countries, a 29 percent increase from the second quarter. Sales from repeat customers made up 51 percent of third-quarter sales.

German media giant Bertelsmann AG recently took a 50 percent stake in barnesandnoble.com Under the terms of the agreement, Bertelsmann invested $200 million In the online store. Barnes & Noble contributed the net assets of barnesandnoble.com, and received cash proceeds of $75 million in the sale of a portion of its interest in barnesandnoble.com.

The race between online book and music retailer Amazon.com and Barnes & Noble has continued to heat up in recent weeks. Barnes & Noble announced a few weeks ago that it would acquire distributor Ingram Book Group. The move raised anticompetitive concerns among its rivals and analysts, especially with Ingram being one of the largest distributors for Amazon.

Amazon recently announced plans to expand its product lines by introducing video and computer software sales.

Shares of the bookseller edged higher in afternoon trading, rising 1.15 percent to 33. The stock has traded as high as 48 and as low as 22.19 during the past 52 weeks.