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NEW YORK CITY–Bookseller Barnes & Noble Inc. reported a first quarter net earning decline that stems from its investment and spin-off of the GameStop video game stores. Consolidated net earnings are down $0.03 per share, although new earnings from continuing operations are up 37% to $9.9 million or $0.13 per share (guidance was $0.11 to $0.13 per share).

Gross Q1 sales were $1.1 billion, up 4% from last year’s $1.06 billion. Comparable store sales were 2.2% for the quarter, compared with a 9.4% increase a year ago. “The quarter was a bit weaker in the first half and a bit stronger in the back half,” says CFO Joseph Lombardi. “That has something to do with the bestsellers, which were a bit stronger in the back half of the quarter.”

“The overall tone of business was as expected,” says Steve Riggio, CEO of Barnes & Noble. “We anticipate accelerated sales growth in the second quarter with the arrival of the sixth Harry Potter book on July 16th.” Earnings per share are projected to be $0.19 to $0.21 per share.

Broken down, the Barnes & Noble store sales were $959.2 million, up 5%. BN.com online sales were $91.4 million, down 0.6% from last year. B. Dalton store sales were $31.5 million, down 21% (although just down 0.3% once store closings are taken into account). The B. Dalton chain now accounts for just 3% of company sales.

“The emergence of a recent class of what we call mega-bestsellers,”–Riggio cites The Da Vinci Code, The South Beach Diet and The Purpose-Driven Life–”have contributed to a bit more volatility in our sales numbers. “Supermarkets and drugstores have captured market share for these books.

Riggio says market share for best sellers overall have increased over the last three years, which he attributes to pricing and marketing. “We think it’s more likely that mass merchants are effecting smaller bookstores, whose sales are much more dependent on bestselling titles. Less than 5% of our sales come from bestsellers.”

The company completed a $250 million share repurchase program this quarter, and had a new $200 million repurchase approved. Between the two, the company bought back $75 million over the quarter.Barnes & Noble operates 671 Barnes & Noble stores, 150 B. Dalton stores, and the BN.com online site. Seven Barnes & Nobles were opened during the quarters, two Barnes & Nobles were closed, and four B. Daltons were closed.

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