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VOL. 127 | NO. 36 | Wednesday, February 22, 2012

Barnes & Noble Fiscal Q3 Net Income Falls

MAE ANDERSON | AP Retail Writer

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NEW YORK (AP) – Barnes & Noble said Tuesday that its fiscal third-quarter net income fell 14 percent, as rising costs offset higher sales. The company also said it will introduce a cheaper Nook Tablet.

In its latest salvo in the tablet competition Amazon.com, Barnes & Noble said it will sell a Nook Tablet device with 8 gigabytes of memory for $199. Its current 16GB device sells for $249. Amazon.com's Kindle Fire also has 8GB and sells for $199. In addition Barnes & Noble cut the price of the Nook Color to $169 from $199. It has fewer tablet-like features than the Nook Tablet.

New York-based Barnes & Noble has been investing heavily in its Nook business. Revenue from Nook e-readers and its digital catalog rose 38 percent to $542 million. That includes the actual selling prices for e-books, rather than the commission received on selling them, as well as all deferred e-reader device revenue. The company estimates it has a 27 percent to 30 percent share of the U.S. e-book market.

Traditional book sales rose 4 percent in the quarter. It was the first holiday season that Barnes & Noble did not have competition from Borders, a major rival that liquidated last year.

Barnes & Noble has been shifting store inventory away from books toward games and toys and other gift items. That strategy seems to be paying off.

Revenue in stores open at least one year rose 2.8 percent. The measure is a key indicator of a retailer's financial health because it excludes stores that opened or closed during the year.

"In the third quarter, our traffic and sales in stores were the highest we've seen in five years," said Barnes & Noble CEO William Lynch said in a call with investors. "Our juvenile business and our toys and games department both drove significant double-digit increases, due in large part to the execution of our new merchandising strategies."

Net income for the 13 weeks ended Jan. 28 fell to $52 million, or 71 cents per share. That compares to $60.6 million or $1 per share last year. Excluding one-time charges, net income was 99 cents per share. Analysts expected 94 cents per share.

Revenue rose 5 percent to $2.44 billion. Analysts expected revenue of $2.53 billion.

The company's cost of sales rose nearly 12 percent and its selling and administrative expenses were up about 14 percent.

Barnes & Noble reaffirmed its guidance for the full year. The bookseller expects a yearly loss of $1.40 to $1.10 per share on total sales between $7 billion and $7.2 billion. Analysts expect a loss of $1.14 per share on revenue of $7.26 billion.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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