Barnes & Noble Inc. (BKS) posted disappointing second-quarter sales on Thursday, hurt by heavy discounting on Harry Potter (search) books and store closings, pushing shares of the No. 1 U.S. bookseller down 3 percent.
The company's sales rose just 6 percent, to $1.17 billion. Analysts had been expecting sales of $1.18 billion on a bigger boost from the sixth volume of the Harry Potter saga, "Harry Potter and the Half-Blood Prince (search)."
The new book about the boy wizard sold more than 8.9 million copies in the first 24 hours it was on sale in the United States and Britain, becoming the fastest-selling book in history, according to publishers.
But retailers cut heavily into their profits on the book, selling it at discounts of more than 50 percent to lure customers into stores.
Barnes & Noble posted a 55 percent rise in second-quarter profit, citing robust sales of the Harry Potter book, which boosted customer traffic in its stores and online.
Sales at stores open at least a year rose 4.3 percent, in line with the company's forecast. Sales declined about 21 percent at its B.Dalton (search) stores, hurt by store closings.
Barnes & Noble also said its board of directors authorized the initiation of a quarterly cash dividend of 15 cents a share.
Second-quarter net income rose to $13.5 million, or 18 cents per share, from $8.7 million, or 12 cents per share, a year earlier.
Excluding special items, the company earned 20 cents a share, in line with the average forecast among analysts polled by Reuters Estimates.
The results contrasted sharply with those of top rival Borders Group Inc. (BGP), whose second-quarter profit fell 84 percent due to weak sales in Britain and costly store remodeling.
Barnes & Noble forecast a third-quarter net loss of 1 cent to 4 cents a share due to costs of 3 cents a share related to a new distribution center.
Analysts, on average, had been expecting a profit of 2 cents a share before special items, according to Reuters Estimates.
The company forecast that sales at stores open at least a year, or same-store sales, would rise 3 percent this year.
On the New York Stock Exchange, Barnes & Noble shares were off $1.76 at $38.29. Borders shares also fell 3 percent, down 73 cents to $22.27.