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Barnes & Noble Misses Estimates, Though In-Store Sales Rise Slightly

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Barnes & Noble (NYSE: BKS) hopes to advance a narrative of momentum and the power of bricks-and-mortar bookstores in its third-quarter earnings report this morning, which coincides with the launch of a $199 Nook Tablet. The Nook business is struggling to compete against Amazon’s Kindle, and despite some gains it missed analyst estimates.

Revenues were $2.4 billion, up 5 percent from last year, with earnings of $52 million on $0.71 per share — lower than analysts’ estimated $1.01 per share but, according to B&N, “impacted by the dilutive impact of the convertible preferred shares held by Liberty Media.” The company also deferred income from textbook rentals. Without those effects, B&N says, earnings would have been $0.99 per share — roughly flat with earnings of $1 per share this time last year.

Sales: In-Store And Digital In-store sales increased 2 percent over last year, to $1.49 billion, though comparable store sales grew more slowly than this time last year — up 2.8 percent compared to 7.3 percent a year ago. Physical book sales in retail stores were up over 4 percent over last year.

Sales at increased 32 percent over last year, to $420 million, and consolidated Nook business increased 38 percent to $542 million. Nook unit sales were up 64 percent over last year — not surprising since Barnes & Noble introduced both the Nook Simple Touch e-reader and the Nook Tablet since that time — but the company did not break out that figure in dollars. Digital content sales, including e-books, digital newsstand and apps, increased 85 percent on a comparable basis but again were not broken out in dollars. In its holiday sales report, the Nook Simple Touch’s sales were so bad that Barnes & Noble actually downgraded its projected full-year earnings, to $150 to $180 million. That range remains the same with this earnings report.

Textbook rentals negatively impacted Barnes & Noble’s College sales, which declined 3 percent to $525 million. As noted above, the company says deferred income from textbook rentals also affected its earnings per share, “the majority of which will be realized in the fourth quarter.”

E-Book Market Share Appears Flat Including the 8 GB Nook Tablet launched this morning, Barnes & Noble has released three new devices since its 3Q 2011 earnings report, yet it is not gaining much market share against Amazon (NSDQ: AMZN). “According to some of the largest U.S. publishers, we maintained or slightly gained share in the e-book market during the third quarter,” Lynch said in the press release. He did not say what Barnes & Noble’s e-book market share is, though he has said in the past that it is around 26 percent (compared to Amazon’s estimated 55 to 60 percent). He may say more in this morning’s earnings call.

Spending On Nook EBITDA fell 12 percent overall, to $150 million, with particular losses on the side “as the company continued to invest in its rapidly growing Nook business, including advertising costs and personnel.”

In its holiday earnings report, Barnes & Noble said it might spin off its Nook business, which it believes is undervalued, but did not mention that in this report. The company is also reportedly seeking to unload Sterling Publishing.