By MAE ANDERSON, Associated Press
NEW YORK (AP) — Barnes & Noble's shares fell on Thursday after it reported a second-quarter profit but its digital content growth slowed as it faces increased competition from rivals like Amazon and Google.
The largest traditional retailer has invested heavily in its Nook e-business as consumers increasingly shop online and read e-books. Barnes & Noble said revenue from its Nook business grew, but devices sales fell due to lower average selling prices for the Nook. Digital content revenue grew 38 percent, but that was down from a 46 percent increase in the fiscal first quarter.
Investors were hoping for higher growth, and shares fell $1.50, or 9.3 percent, to $14.55 in midday trading. The stock had been up about 11 percent for the year,
Revenue from the New York company's Nook division rose 6 percent to $160 million. Barnes & Noble introduced two new Nook e-readers, a 7-inch Nook HD and 9-inch Nook HD+, during the quarter, and began shipping them just after the quarter closed.
In a call with analysts, CEO William Lynch said the company expects digital content buying to pick up after the holiday season, when Nooks are expected to be popular gifts.
The company said Nook unit sales doubled over the busy four-day shopping weekend after Thanksgiving, the so-called Black Friday weekend, as the company increased markdowns at retailers like Target and Wal-Mart Stores.
But the Nook faces tough competition from other new devices this holiday season, including Apple's iPad Mini, new Amazon Kindles and Google's Nexus tablet.
"They're maintaining their market share by way of promoting and discounting," said Morningstar analyst Peter Wahlstrom. "But it's a more competitive marketplace."
Net income totaled $2.2 million for the three months ended Oct. 27. That translates to a loss of 4 cents per share, however, after the impact of preferred stock dividends. That matched analysts' expectations, according to FactSet.
The results compare with a prior-year loss of $6.6 million, or 17 cents per share.
Revenue was nearly flat at $1.88 billion. Analysts expected revenue of $1.91 billion.
Revenue from stores fell 3 percent to $996 million. Its college bookstores' revenue rose less than 1 percent to $773 million. Revenue in stores open at least one year, excluding sales of Nook products, rose 1.8 percent.
The metric is considered a key gauge of a retailer's fiscal health because it excludes stores that open or close during the year.
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