Barnes & Noble Misses Expectations, Though Digital Sales Increase

As it enters the holiday season with the new Nook Tablet for sale and hopes to seize on the “$2 billion up for grabs” as a result of Borders’ bankruptcy, Barnes & Noble (NYSE: BKS) announced its Q2 2012 earnings this morning. Revenues were lower than expected and in-store sales were down, though sales increased year-on-year. Barnes & Noble stock is down about 12 percent this morning following the report’s release.

Revenues were $1.89 billion, down from $1.90 billion this time last year. The company also saw net losses of $6.6 million for the quarter, or $0.17 per share, missing the Street’s expected earnings of $0.02 per share.

Barnes & Noble is trying hard to draw customers into its stores: It’s heavily promoting its in-store Nook customer support, adding “Digital Shops” to select stores and running special promotions, like one with James Patterson, to pull shoppers in. CEO William Lynch recently called retail stores “our biggest competitive advantage,” yet it’s unclear how well this efforts are working: Store sales decreased by 1 percent in the quarter, and physical book sales declined, though the company said those sales “were positively affected by the liquidation of the remaining Borders stores.” Barnes & Noble expects in-store sales to pick up over the holidays, and said “comparable store sales increased 10.9 percent” at B&N stores over Thanksgiving weekend.

Sales at increased 17 percent from this time last year, to $206 million from $177 million. ( sales were $198 million in Q1 2012.) Nook business across the company, “including sales of digital content, device hardware and related accessories,” increased 85 percent in the quarter year-on-year, to $220 million, “on a comparable sales basis”–but, as Publishers Marketplace points out, Nook sales were $277 million in Q1 2012. In an investor call following the report, Lynch attributed the disparity to seasonal variation, and said the company expects to sell “millions” of Nook devices in Q3 2012.