Is Barnes & Noble next?

The book retailer struggles even after rival Borders falls into bankruptcy, suspending its cash dividend.

By Kim Peterson Feb 22, 2011 2:42PM
Credit: ((C) Gene J. Puskar/AP)

Caption: Barnes and Noble storeYou might think the implosion of Borders bookstores would be great for rival Barnes & Noble (BKS). But no, Barnes & Noble is struggling as well and said today it will suspend dividends to shareholders.

Previously, the annual dividend was $1 a share. Barnes & Noble also said it will stop giving forecasts for the rest of the fiscal year. The stock plunged 15% on the news and at midday was down more than 12% to $16.30.

The company's cash situation is precarious. Barnes & Noble lost $14.5 million in the nine months through January, Bloomberg reported, and will get about $60 million a year from the suspended dividend. "There's still an uphill battle from the physical side of the business," a Morningstar analyst told Bloomberg.

The problem for Barnes & Noble, of course, is that there isn't just the physical side of the business. The company has been trying to wage war against (AMZN) and its popular Kindle reader, and that takes money and resources.

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The Kindle owns two-thirds of the e-book market in the U.S., analysts say, while the Barnes & Noble Nook has only 22%. Similarly, Amazon gets 58% of e-book sales, while Barnes & Noble gets 27%, Bloomberg reported.

Could Barnes & Noble end up following Borders into bankruptcy? It's too early to say. But the company's challenges are significant as it fights a very strong digital competitor and flagging sales on the physical side. Borders' bankruptcy did provide one ray of sunshine: Same-store sales at Barnes & Noble rose for the first time since 2007 a week after Borders filed for bankruptcy, Bloomberg reported.

Barnes & Noble put itself up for sale last year, but the company has been quiet about any progress on that front.
Feb 22, 2011 5:52PM
Hi, I think I'm an example of why Borders and mayby now B&N have troubles. I love to read but their prices are high compared to Amazon, where one can find slightly used books at much lower prices.
Feb 22, 2011 9:00PM
This is the beginning of the end of printed books.  Think about it - in the world of printed books, hundreds of people could read a single copy of a book, by borrowing it from the library or each other, and the author and pubisher got paid exactly once on that book.  in the new world of electronic books, where you actually have to purchase a book to read it (except for stuff that is free, which no one wants to read), the author and publisher capture a royalty on every single book that is read.  There is no way to loan it to another person unless you give them your Kindle.  Long term, it will eliminate all borrowing and reduce the education of the people who cannot pay for books.  Very smart and profitable on the part of the publishing empires, with none of the costs of actually printing.
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