Barnes & Noble Q4 profit drops 29%

New York City Barnes & Noble said Thursday its profit fell 29% in the fiscal fourth quarter, citing sales drops due to scaled-back book purchasing. But adjusted results beat Wall Street’s expectations.

Barnes & Noble earned $81.2 million for the quarter, compared with $115 million a year earlier. Excluding a severance charge, however, profit was $93.3 million.

Fourth-quarter sales declined 6% to $1.63 billion.

For the full year, profit dropped 44% to $76 million, from $136 million in 2007. Sales fell 3% to $5.12 billion for the year.

“While 2008 proved to be the most challenging year that the company and the industry have ever experienced, we are proud of our financial results in light of the macro retail environment,” said Steve Riggio, CEO, Barnes & Noble. “Despite a sales decrease of 3%, gross margins improved by 50 basis points, inventory levels were reduced by 11%, and our focus on expense control and capital expenditures enabled us to generate operating free cash flow of $150 million, exceeding our expectations.”

As of Jan. 31, 2009, the company operated 726 Barnes & Noble stores and 52 B. Dalton stores. During the fourth quarter, five Barnes & Noble stores were opened and seven were closed. Nineteen B. Dalton stores were closed during the quarter.

Looking ahead, the bookseller said it expects the challenging retail environment to continue.

“Sales forecasts have been planned accordingly and expenses have been cut,” Riggio said. “The strength of our balance sheet remains a top priority. And, while we are reducing overall expense levels where appropriate, we will continue to invest in the growth areas of the business, as evidenced in our recent acquisition of Fictionwise.”