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Barnes & Noble Turns To Profit In Q3; Plans To Launch NOOK Color Device

Barnes & Noble, Inc. (BKS) reported third-quarter consolidated net earnings of $63.2 million, or $0.86 per share, compared to a net loss of $3.7 million, or a loss of $0.14 per share, prior year. During the quarter, the company recorded an additional valuation allowance against certain deferred tax assets as a result of decisions made regarding the company's future device strategy in international markets. The impact of this item on third quarter net income was $44 million.

On average, four analysts polled by Thomson Reuters expected the company to report profit per share of $0.61 for the quarter. Analysts' estimates typically exclude special items.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $173 million from $59 million a year ago. The company's prior year results were adversely impacted by $74 million of NOOK inventory-related charges. The company said the remaining year-over-year EBITDA increase was primarily attributable to lower NOOK expenses.

Consolidated revenues decreased 10.3% to $2.0 billion, as compared to the prior year. Analysts expected revenue of $2.01 billion for the quarter.

The company's Retail segment, which consists of Barnes & Noble bookstores and BN.com, had revenues of $1.4 billion for the quarter, decreasing 6.3% over the prior year. The company said the sales decrease was attributable to a comparable store sales decline of 4.9% for the quarter, store closures and lower online sales. Comparable store sales declined primarily due to lower sales of NOOK products. Core comparable bookstore sales, which exclude sales of NOOK products, decreased 0.5% for the quarter.

The NOOK segment (including digital content, devices and accessories) had revenues of $157 million for the quarter, decreasing 50.4% from a year ago. Device and accessories sales were $100 million for the quarter, a decrease of 58.2% from a year ago, due to lower unit selling volume and lower average selling prices.

The company also said it plans to launch a new NOOK color device in early fiscal 2015.

The company reaffirmed its previously issued full-year guidance, in which it expects Retail comparable store sales to decline in the high single digits, Core Retail comparable bookstore sales to decline in the low- to mid-single digits and College comparable store sales to decline in the low single digits.

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