May 28 – June 4, 2009 Edition

Sagging Bookstore Sales
Affect B&N Investors’ Mood

Barnes & Noble, Inc. last week reported sagging performance for its first quarter ended May 2, 2009. But perhaps more troubling is that during the past three months, insiders have sold net 1.7K shares, in stark contrast to a net stock purchase of 474.0K shares over a two year average. One stock reporting site said the fact that more investors are selling shares, than buying them, “indicates insiders are less bullish than they have been in recent times.”

B&N reported a 4% decrease in 2009 sales for the first quarter to $1.1 billion, compared to the first quarter last year. Store sales decreased 3.5% to $989 million, and comparable store sales fell 5.7% for the first quarter, slightly better than guidance for a decrease of 6% to 9%. Barnes & Noble sales were $93 million for the quarter, down 7% from the prior year.

Year over year, Barnes & Noble, Inc. has seen revenues fall from $5.3B to $5.1B. This along with an increase in Selling, General, And Administrative (SG&A) Expenses has led to a reduction in the bottom line from $135.8M to $75.9M.

On the optimistic side, The Wall Street Journal reported May 22 that Steve Riggio, the retailer’s CEO, expects an impressive slate of potential blockbuster books this fall, including top authors such as Dan Brown, whose new novel, “The Lost Symbol,” is scheduled for publication Sept. 15.

Bestselling titles during the quarter included two Barnes & Noble Recommends selections: Sandra Dallas’ Prayers for Sale and Spencer Quinn’s Dog on It. Additional bestsellers include Steve Harvey’s Act Like a Lady, Think Like a Man, Malcolm Gladwell’s Outliers and Mark Levin’s Liberty and Tyranny.

The first quarter net loss from continuing operations was $2.1 million or $0.04 per share, compared to guidance of a loss per share of $0.10 to $0.20. The company was able to exceed its guidance due to better than expected revenues, gross margins and a continuous focus on expense management.

For the second quarter, the company expects comparable store sales at Barnes & Noble stores to decline 5% to 7%. Second quarter earnings per share are expected to be in a range of $0.05 to $0.15, compared to $0.18 from continuing operations a year ago (excluding a physical inventory benefit).

For the full year, the company now expects comparable store sales at Barnes & Noble stores to decline 3% to 5%, better than previous guidance for a comparable store sales decline of 4% to 6%.

As of May 2, 2009, the company operated 726 Barnes & Noble stores and 51 B. Dalton stores. During the first quarter, six Barnes & Noble stores were opened and six were closed. One B. Dalton store was closed during the quarter.