A bitter battle is brewing between big booksellers.
Shares of Barnes & Noble dropped nearly 5 percent yesterday after the giant chain warned the coming year’s profits will sorely miss Wall Street’s forecasts. The retailer blamed “recessionary pressures,” and noted that “the bookselling environment remains very competitive.”
The nation’s biggest bookseller noted its business will be up against tough comparisons with last year, which saw record-breaking demand for titles including “Harry Potter and the Deathly Hallows.”
But analysts say the New York-based company faces still-bigger threats from rivals Amazon.com and Borders. Amazon is gaining customers through its “Prime” membership program that offers flat fees for shipping, said Goldman Sachs analyst Matthew Fassler. Meanwhile, Borders has been aggressively expanding its own shopper-loyalty program.
Since the start of the year, Borders has “meaningfully increased” discounts as it scrambles to regain market share , said JPMorgan analyst Charles Grom.
Barnes & Noble has a solid reputation on Wall Street, praised for its ability to secure good locations and run stores efficiently. But over the past year, profits have suffered as the company has been forced to match aggressive pricing at Borders.