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Top 2 booksellers report losses, their shares fall

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MAE ANDERSON | November 24, 2009 03:50 PM EST | AP


NEW YORK — Barnes & Noble Inc. and Borders Group Inc., the nation's two largest brick-and-mortar book sellers, both posted quarterly losses Thursday and forecast a difficult holiday season, saying competition from discount chains and online retailers is stiffening.

Barnes & Noble, the larger of the two, also cut its forecast for annual profit, and shares of both retailers fell.

Even with online presence, traditional bookstores have had a rough time facing off against online sellers like Amazon.com as they also compete with low-price brick-and-mortar stores including Wal-Mart Stores and Target and cope with consumers cutting discretionary purchases amid tough economic times.

But Barnes & Noble CEO Stephen Riggio said this fall's price war among Amazon.com, Walmart.com and Target Corp.'s online division – in which those retailers cut prices on preorders for some new titles to $9 and less – was "overblown."

"Book-selling has been for a long time a 'long tail' business," Riggio said during a conference call with investors. "Best sellers represent less than 5 percent of our sales and among these very top best sellers less than 1 percent of our sales."

Still, "every percentage counts," said Michael Norris, a senior analyst with Simba Information.

"I wouldn't be that quick to dismiss the influence of the big discounters there," he said. "You can go to Walmart.com and get the Sarah Palin book for a few bucks less than you can at either of them."

Barnes & Noble, which operates 775 stores, reported a fiscal second-quarter loss of 43 cents per share. Excluding costs related to buying back its 636-store college bookstore from its chairman in August, it lost 30 cents per share, matching analyst forecasts.

Sales for the quarter ended Oct. 31 rose 4 percent to $1.16 billion – though the increase was due to revenue from the college bookstores. Excluding that, Barnes & Noble sales fell 2 percent to $1.09 billion.

The company, based in New York, lowered its yearly forecast as the costs of producing its new electronic reader, the Nook rose and holiday sales seemed off to a weak start.

Shares fell $1.45, or 6.2 percent, to $22.07 during afternoon trading. The stock has traded between $12.64 and $28.78 over the past year.

Barnes & Noble is pinning its hopes for future profit on the Nook, a competitor with Amazon.com's Kindle for which it began accepting pre-orders last month. Last week, it said orders had exceeded expectations and those placed beginning Nov. 20 would be filled Jan. 4 or later. The company plans to bulk up its e-content digital business, selling digital subscriptions to newspapers, blogs, magazines and other periodicals as well as digital books.

Both companies forecast a weak holiday season.

"This is an unpredictable holiday selling season as consumers remain unsettled and reactive to economic news," said Borders CEO Ron Marshall.

Borders Group Inc. lost $38.5 million, or 64 cents per share, less than a year ago, but its third straight quarterly loss. Revenue for the three months that ended Oct. 31 dropped 13 percent to $602.5 million.

In an effort to improve its finances, Borders, based in Ann Arbor, Mich., has cut jobs, closed stores and chosen new leaders. It also has shifted its focus from less profitable categories like music and toward children's books, toys, stationery and its cafe.

But it has been slower than Barnes & Noble to shutter its lower-margin small-format stores and grow its e-commerce business.

"Barnes & Noble still remains at least one step ahead of Borders," Norris said.

Borders shares fell 30 cents, or 14.9 percent, to $1.71 during afternoon trading. It has traded between 34 cents and $4.48 over the past year.

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AP Retail Writer Michelle Chapman contributed to this report from New York.