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Barnes & Noble Falls as Projected Annual Loss Widens

Nov. 30 (Bloomberg) -- Barnes & Noble Inc., the largest U.S. bookstore chain, fell after forecasting a wider annual loss as it invests in digital reading and sales of more profitable physical books decline.

The loss for the year will be as much as $1.15, the New York-based company said in a statement today. In August, the bookseller forecast a loss of up to 65 cents. It also failed to post a profit for the fourth time in five quarters, losing $12.6 million, or 22 cents a share, for the three months ended Oct. 30, compared with $24 million, or 43 cents, a year earlier.

The book chain has invested in the growing popularity of e-reading, releasing its Nook e-reader a year ago and followed with a color version last month. Those devices, priced as high as $249, have boosted sales while also hurting profit margins, said Michael Souers, a retail analyst for Standard & Poor’s in New York.

“Until there is a mass adoption of e-readers and people start buying the e-books themselves, margins will keep taking a hit and profits will be tough to come by in the near term,” said Souers, who recommends holding Barnes & Noble shares.

Barnes & Noble declined 85 cents, or 5.7 percent, to $14.02 at 4:01 p.m. in New York Stock Exchange composite trading. The shares earlier lost as much as 17 percent before rallying. The stock has dropped 26 percent this year.

Potential Sale

The retailer also said today that it’s completing a review of its strategic options that began in August, including a potential sale. Meetings with both strategic and financial institutions have taken place and there is no guarantee a transaction will occur, the company said.

The company’s digital investments, sales of lower-margin e-readers and an increase in holiday marketing led to the projection for a larger loss, Chief Financial Officer Joseph Lombardi said in a telephone interview.

Selling and administration costs in the quarter rose 81 percent to $61.5 million at the online unit, where the retailer records Nook and digital investments.

The focus on digital reading has helped boost revenue, both online and in stores, the company said. Sales during the Thanksgiving weekend rose 17 percent at stores open at least a year and comparable online revenue more than doubled, the company said.

Same-store sales declined 3.3 percent last quarter, a 12th straight drop. That revenue may rise as much as 7 percent in this quarter, driven by sales of the Nook, the company said.

(Barnes & Noble held a conference call at 10 a.m. New York. To listen, visit BKS US <Equity> EVT <GO>.)

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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