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Barnes & Noble Issues Profit Warning

Retail: Surprise news of weak 2001 earnings drives down shares 36% to a seven-month low.

November 09, 2001|ELLIS MNYANDU | REUTERS

NEW YORK — Barnes & Noble Inc. delivered a surprise warning of weak earnings Thursday as fears of more attacks against the public, including a Halloween hoax, spooked customers from going to malls and bookstores.

The warning for 2001 earnings drove down the retailer's shares 36% to a seven-month low, making it the day's percentage-loss leader on the New York Stock Exchange as investors worried that a stagnating economy and rising layoffs could compound a sales recovery.

The shares closed down $13.60 at $24.48. The stock had traded as low as $24 in the session, its lowest level since April 30, when it hit $23.60.

Barnes & Noble's news also drove down stocks of its rival booksellers, with Borders Group Inc.--the No. 2 U.S. bookstore--falling $1.76, or 10%, to $15.75 on the New York Stock Exchange. Amazon.com Inc., the Internet bookseller, closed off 46 cents, or 6%, at $6.97 on Nasdaq.

William Armstrong, an analyst at C.L. King & Associates, said the earnings warning came as a surprise because the book business was viewed as resistant to the prevailing economic downturn.

Shoppers had been expected to favor books as a means of diverting attention from the fallout of the Sept. 11 attacks.

"The book business had been doing OK even after Sept. 11. So this news is quite unexpected," said Armstrong, who has a "strong buy" rating on the stock.

The New York-based retailer said it expects to post consolidated 2001 earnings per share of $1.08 to $1.12 a share. It also cut its fourth-quarter earnings outlook for its retail bookstore business.

Analysts polled by Thomson Financial/First Call had forecast earnings of $1.60 for the year, on average.

The bookseller said sales at its superstores open at least a year fell 0.4% in October from a year ago. It said it also expects same-store sales for the fourth-quarter to be flat to up by 2%. It said the retail bookstore unit will probably report fourth-quarter earnings from $1.04 to $1.08 a share.

Chairman and Chief Executive Leonard Riggio said the projected earnings shortfall will be exacerbated by the war in Afghanistan.

Barnes & Noble said video game comparable-store sales also were not spared in October, but their decline of 19.7% was in line with expectations. For the quarter, video game comparable-store sales, however, rose 3.6%.

Comparable-store sales at B. Dalton, which comprises 8% of total bookstore sales, fell 5.1% for the quarter.

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