Barnes & Noble posts 3Q loss as Nook demand slows

Published on NewsOK Modified: February 28, 2013 at 11:55 am •  Published: February 28, 2013
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NEW YORK (AP) — Physical books may have a longer shelf life than expected. Barnes & Noble posted a third-quarter loss on Thursday, partly because demand for its e-books and Nook e-book readers have plummeted.

Many have predicted the eventual demise of physical books, as e-book readers and e-book demand soars. But that trend appears to be slowing, at least with the Nook, according to Barnes & Noble CEO William Lynch. And digital "cannibalization" — consumers buying e-books instead of physical books — has also slowed.

The company reported said sales of digital media — including digital books, digital newspapers and magazines, and apps — rose just 7 percent during the fiscal third quarter. Sales had risen 38 percent in the second quarter and 46 percent in the first quarter.

Barnes & Noble, based in New York, has invested heavily in its Nook e-book readers and a digital library as more readers shift to electronic books and competition has grown from discount stores and online rivals.

"After the hyper growth in the e-book market over the last few years, consumers have settled into their book formats of choice, and while e-books will continue to drive growth in the book category in the future, physical book sales will have a longer tail (or longer life expectancy) than previously anticipated," he said in a call with investors.

The Nook unit has attracted investors — Microsoft owns 16.8 percent, while U.K. publisher and education company Pearson has a 5 percent stake. But aside from investor funding, it has not been profitable, and has fared worse than its competitors, Amazon.com's Kindle and Apple Inc.'s iPad and iPad Mini.

The company acknowledged it needs to take significant steps to make the Nook unit profitable, or try to spin it off. Lynch said cost cutting and other measures are forthcoming, and Barnes & Noble shares rose nearly 8 percent.

The Nook weighed on the retail stores. Revenue in the entire retail unit, which includes the bookstores and website, fell 10 percent to $1.51 billion. Revenue in stores open in at least one year fell 7.3 percent, and store closings and lower online sales also hurt results. But excluding Nook sales, revenue in Barnes & Noble stores open at least one year fell 2.2 percent in the fourth quarter.

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