Barnes & Noble expects to miss fourth-quarter estimates by some 11% for its bookseller segment and a whopping 82% for its video game and entertainment software segment. January sales appear to be back on track, however.
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Barnes & Noble (NYSE: BKS), the nation's number-one bookseller, says fourth-quarter earnings will not live up to expectations. The company blames a couple of disparate events for the shortfall: the U.S. presidential election controversy and the shortage of the new Sony PlayStation 2 game machines. According to a statement released this morning, Barnes & Noble expects earnings from its bookseller segment to come in around $1.30 a share instead of the $1.46 a share projected by analysts. The video game segment will fall far short of consensus estimates of $0.33 a share, instead earning about $0.06 a share. Chairman and CEO Leonard Riggio traces the disappointment back to Nov. 8, the day after the election. He says sales fell off dramatically then and did not recover until the matter was resolved. "Perhaps this was due to the nature of our demographic audience -- interested, involved, educated voters -- or due to a connected problem publishers described as not getting air time for their 'hot' seasonal authors," said Riggio. As if offering evidence, he also noted that January sales are back on their projected track. Despite the earnings shortfall, revenue for the company's "super" stores was a record $763.7 million for the nine-week period ended Dec.30. That represents a 6.1% increase over the prior year. Super store comps increased 1.3% for the period. Sales for the B. Dalton division slipped 15.5% to $107.9 million for the nine weeks, hurt by the closing of 55 stores. Besides operating over 900 bookstores under the Barnes & Noble and B. Dalton names, the company is also the nation's largest operator of video game and entertainment software stores through Babbage's and Funco. Riggio says PlayStation 2 shipments were reduced even more than expected, but that was only part of the problem for its video game segment. Unable to get a PlayStation 2, many consumers were not interested in buying games and other products. The company did not "expect consumers to reject the other products in the pipeline owing to their insistence on waiting for the newer platforms to arrive." (The Motley Fool takes a closer look at the video game business in Industry Focus 2001.) Babbage's holiday sales of $255.4 million were 35.2% greater than the same period last year. Comparable store sales, however, decreased 12.5% Barnes & Noble's warning mirrored the recent troubles of other traditional retailers, including Wal-Mart (NYSE: WMT), Gap (NYSE: GPS), and rival bookseller Borders (NYSE: BGP). This stands in contrast to the relative success of online merchants over the holidays. Amazon.com (Nasdaq: AMZN) reported after the bell yesterday that its fourth-quarter revenue will come in as expected, hitting at least $960 million. (Read more about it in this morning's Breakfast With the Fool.) Barnes & Noble says it will provide more detail on its fourth quarter, release 53-week sales figures, and offer preliminary 2001 guidance on Feb. 22.
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