Barnes & Noble 2Q profit rises 23 pct.

NEW YORK - Barnes & Noble Inc., the nation's largest bookseller, reported a 23 percent increase in second-quarter earnings, as lower costs for goods and rent helped offset declining sales in the absence of a blockbuster title.

The New York-based retailer said Thursday that for the quarter ended July 29, net income increased to $16.6 million, or 24 cents per share, from $13.5 million, or 18 cents per share, a year ago. The latest quarter includes stock-based compensation costs of 4 cents per share.

Sales decreased 1 percent to $1.16 billion from $1.17 billion last year, largely due to year-ago sales of best-seller "

Harry Potter and the Half-Blood Prince."

Results were in line with company guidance of 22 cents to 26 cents per share, and beat Wall Street expectations for profit of 23 cents, though sales were shy of analysts' $1.19 billion consensus estimate according to a poll by Thomson Financial.

The better-than-expected results sent shares up 5.4 percent, or $1.91, to close at $37.26 on the

New York Stock Exchange.

The company said Barnes & Noble store sales of $1.0 billion were unchanged year-over-year, with same-store sales, or sales at stores open at least a year, falling 2.6 percent. Same-store sales are considered the best indicator of a retailer's health. B. Dalton sales dropped 31 percent to $21.9 million due to store closings and a 9.1 percent comparable store sales decline. Sales at Barnes & Noble.com slid 14 percent to $82.7 million.

"We look back at the first half of this year as one of the softest periods in recent memory for the book industry in terms of hardcover new releases," said Steve Riggio, CEO of Barnes & Noble, in an address to investors during a conference call Thursday."There were simply very few new hardcover books that generated media buzz or sustained sales by word-of-mouth recommendations." Still, when factoring out the sales of the Harry Potter title, Riggio noted that same-store sales would have been slightly positive.

Riggio said such results underscore that even with the absence of a blockbuster title, Barnes & Noble has a strong foundation, which is its backlist when publishers' lists are weak.

Among the notable bright spots Riggio cited in the quarter was Kim Edwards' "The Memory Keeper's Daughter," one of the fastest-growing trade paperbacks in the company's history.

For the third quarter, the company sees same-store sales at Barnes & Noble stores ranging from unchanged to an increase in the low-single digits. The company said it continues to expect full-year, same-store sales gains in the low single digits.

Barnes & Noble said it expects to post a loss of 4 cents to 8 cents per share, including 4 cents of stock-based costs. That compares with analysts' expectations for adjusted profit of 2 cents per share.

For the full year, the company backed prior guidance in the range of $2.20 to $2.30 per share, which includes stock compensation expense of 15 cents. Wall Street is predicting earnings of $2.27 per share.

Barnes & Noble is one of a slew of companies being investigated by the

Securities and Exchange Commission for stock option practices. The company reiterated on Thursday that it appointed a special committee to review the issue, but declined to talk further about the subject.