Barnes & Noble posts 1Q loss, cuts annual guidance

NEW YORK — Barnes & Noble Inc. posted a first-quarter loss on legal expenses related to its proxy fight with billionaire financier Ron Burkle and cut its annual earnings outlook on costs related to the fight.

The results missed expectations and shares fell on Tuesday. But the struggling book seller reported it was making inroads with its online bookstore and e-book reader Nook. Some analysts said that was a sign of optimism as the company can make up for falling sales in retail stores online.

"If you have a situation where losses on the print side are being more than made up for on the digital side, that's not a good thing. That's a miracle," said Michael Norris, senior trade analyst at Simba Information.

The largest U.S. traditional book seller said it lost $62.5 million, or $1.12 per share, in quarter ending July 31. Last year during the same period it earned $12.3 million, or 21 cents per share.

Revenue rose 21 percent to $1.4 billion, although the cost of sales rose as the company invested more in its online book store and Nook e-reader.

Analysts expected a loss of 80 cents on revenue of $1.4 billion, according to Thomson Reuters.

Shares fell 34 cents, or 2.3 percent, to $14.66 Tuesday.

The company, based in New York, said it has now has a larger share of the digital book market than its 17 percent share of physical books. Barnes & Noble said one-quarter of Nook customers are new to Barnes & Noble's website, and people with Nooks have increased their spending by about 20 percent.

Electronic books are a small but fast-growing part of the book market.

CEO William Lynch said he expects the share gains to continue throughout the holidays and beyond. The company is rebranding all of its digital reading efforts around the Nook so that "Nook equals digital reading from Barnes & Noble to consumers," he told investors on a conference call.

The company plans to spend $140 million this year to boost its digital presence and market its Nook and is staying on target with its spending, said Morningstar analyst Peter Wahlstrom.

"Management seems to be acting pretty prudently given a challenging environment," he said.