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Barnes & Noble Could Be Treading Water. Is It Time to Short?

NEW YORK (TheStreet) -- Barnes & Noble (BKS) could be in trouble. Management seems to be making all the wrong moves.

Aside from the usual fuss about the ability of a primarily bricks-and-mortar retail chain to compete against online retailers, such as Amazon (AMZN), which frequently sell titles at a discount, the company appears to be at the start of a downward spiral.

Right now, Barnes & Noble is trading at $16.09, on a 52-week range of $10.45 to $26.00, and I have a sneaking suspicion it is only going to get worse from here. I see bright flashing warning signs at the book retailer.



Barnes & Noble announced Friday that it would give away a Nook Simple Touch with the purchase of any Nook HD from Sunday through Saturday -- really? Buy one, get one free e-readers?

C'mon. Someone has a surplus.

And this is not the first time the book seller has given away Nooks. Last year, the company was offering free or discounted e-readers (depending on the type of Nook) to anyone who signed up for a one-year subscription to People or The New York Times. Of course, that promotion lasted around eight weeks -- this one is lasting for less than eight days, but it points to an issue. You don't pull a buy-one, get-one deal unless you are trying to get rid of stock, regardless of the length of the promotion.

Imagine for a minute that your favorite retailer said that for the next week, everything in the store was buy one, get one free -- it wouldn't sit right. Most people would assume that the store is really down in sales, possibly even going out of business.

I'm not saying that is the case here -- I'm just saying that the fact of offering such a "bargain" points to a greater issue at the company.

At a minimum, Barnes & Noble should be managing its manufacturing process better so that such surpluses are not a fact of business.



Then there is the fact that Barnes & Noble cut the number of Simon & Schuster titles it carries. The reduction is reportedly the result of a disagreement over money, but still.

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