Regional and online bookseller Books-a-Million (NASDAQ:BAMM) is much smaller than archrivals Barnes & Noble (NYSE:BKS) and Borders (NYSE:BGP) in the bricks-and-mortar book business, and Amazon (NASDAQ:AMZN) currently rules the online roost. Many other competitors lurk in the space as well, but BAMM continues to find ways to survive and even thrive on a number of levels. Tomorrow's second-quarter earnings release will provide management the opportunity to fill Fools in on recent trends, including an update on the current Harry Potter mania.

What analysts say:

  • Buy, sell, or waffle? One whole analyst currently follow Books-a-Million and rates the stock hold.
  • Revenues. The analyst is projecting $129.8 million in second-quarter sales, or approximately 7% ahead of last year's second-quarter sales amount.
  • Earnings. The analyst sees quarterly earnings coming in at $0.17, for over 13% growth from last year's quarter when stripping out a one-cent loss from discontinued operations.

What management says:
During its first-quarter earnings release, management fell short of offering second-quarter specifics, but did state, "As we enter the second quarter we look forward to a strong summer movie lineup and the publication of Harry Potter and The Deathly Hallows on July 21st."

What management does:
Books-a-Million is only growing sales in the mid-single digits, but it has been posting higher gross, operating, and net margins, suggesting it is finding ways to squeeze out increasing profits despite ever-challenging top-line trends in an intensely competitive and low-margin industry.

Margins

01/06

04/06

07/06

10/06

02/07

05/07

Gross

29.1%

29.2%

29.5%

29.5%

30.1%

30.2%

Operating

4.5%

4.5%

4.8%

5.1%

6.1%

6.3%

Net*

2.6%

2.7%

2.8%

2.9%

3.6%

3.7%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
One would think Books-a-Million would have a tough time surviving in the book biz in having to compete with the really big boys, who each report close to 10 times as much sales as BAMM. In addition, most big-box giants sell best-selling books at cutthroat prices to garner customer traffic -- as a case in point, the latest Harry Potter novel swept through the likes of Costco (NASDAQ:COST), Target (NYSE:TGT), and, of course, Wal-Mart (NYSE:WMT).

Judging by operating cash flow trends over the past three years, competition is indeed eating into the company's cash-generating abilities. Yet it is posting favorable margin trends, has a decent dividend yield of 2.6%, and steadily repurchases shares. The stock is also trading near its lows for the year as the overall market struggles, but I'll wait to see how Harry Potter affects the second-quarter book industry before taking any further action in the space.

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Fool contributor Ryan Fuhrmann is long shares of Barnes & Noble but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. Amazon and Costco are members of the Motley Fool Stock Advisor recommendation list. The Fool has an ironclad disclosure policy.