Unwelcome Surprises from Barnes & Noble

Last week's forecast from Barnes & Noble—that total revenue at its superstores will be up 2% to 4%, with same-store sales flat to slightly positive—was not good news for publishers, who were hoping that a new Harry Potter might give a stronger boost to sales at the nation's largest book retailer. B&N CFO Joe Lombardi said that the same-store sales forecast was based on trends from late 2006, when comp-store sales dipped 0.1% in the fourth quarter. Lombardi said B&N has not seen any indications early in 2007 that trends were about to reverse. He noted that despite a terrific fall lineup of books, revenue in the last quarter came in at the bottom of its forecasted range, and that "nothing has changed" early this year.

Another unpleasant surprise for publishers—higher returns—was the result of B&N's decision to close its Memphis, Tenn., warehouse, which fulfills orders for B&N.com. Since B&N began winding down operations there in recent weeks, returns have gone up, several publishers reported.

For all of last year, B&N reported that total revenue hit $5.3 billion, with superstore sales at $4.5 billion and Internet sales at $433 million.

Barnes & Noble 2007 Forecast*