Despite the continued growth of its online business, Barnes & Noble fell short of fiscal third quarter earnings expectations Tuesday.
Total sales increased 5% from $2.3 billion to $2.4 billion year-over-year, but that was less than the $2.53 billion that analysts had predicted. Net income was $52 million vs. $60.6 million in the year-ago period, a 14% drop. At press time, the company's stock was up about 1% in morning trading.
In-store retail sales were up 2% from $1.46 billion to $1.49 billion. Those brick-and-mortar stores likely benefited from the collapse of the Borders book store chain. Sales at campus bookstores declined 3% from $540 million to $525 million, "due to a shift from selling new and used textbooks to lower priced textbook rentals," according to the earnings release.
Not surprisingly, B&N's strongest area of growth was online. Although online sales of phsyical products were down, total BN.com sales were up by nearly a third, from $319 million to $420 million, driven largely by sales of Nook devices and content for those devices. Nook sales -- a category that includes device hardware, accessories and digital content -- increased 38% to $542 million in the quarter. Actual device sales were up 64% year-over-year; digital content sales were up 85%.
Looking ahead, B&N is expecting full fiscal year 2012 earnings in the range of $150 million to $180 million, with losses per share falling somewhere between $1.40 to $1.10. Consolidated sales are expected in the range of $7 billion and $7.2 billion. Comparable sales at Barnes & Noble stores are estimated to increase 1%, while college sales are expected to be flat. The company expects online sales will continue to grow by 40% to 50%. The Nook business alone is expected to generate approximately $1.5 billion by the end of the fiscal year. Despite the unit's growth, it has been a drag on earnings.
In a separate release, B&N announced the expected launch of an 8GB Nook Tablet for $199. The 8GB Nook Tablet has half the storage of the Nook Tablet the company released late last year and is $50 cheaper, making it more competitive with Amazon's popular Kindle Fire tablet.