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Barnes & Noble

(BKS) - Get Barnes & Noble, Inc. Report

delivered the type of earnings report that isn't a very hard read: the book retailer posted a 20% drop in second-quarter profit.

Granted, the company managed to beat Wall Street's expectations, which likely sent shares up 5% to $22 before the bell. But by midmorning, investors had apparently decided that this was not a story with a happy ending, and had sent shares in the company down by more than 1% to $20.66.

During the quarter the company earned $12.3 million, or 21 cents a share, compared $16.8 million, or 27 cents a share.

Excluding a benefit from an insurance settlement, the company's profit was 14 cents a share, beating Wall Street's expectation of 9 cents.

"Due to strong expense management and improved gross margins we achieved earnings per share near the high-end of guidance," CEO Steve Riggio said in a statement. "While the decline in retail traffic continues to be the principal impediment to our top line, we do offer our customers the ability to shop with us online, where sales were slightly above last year."

Revenue slipped 5% to $1.16 billion, while total same-store sales dropped 6.9%.

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Barnes & Noble has been facing increased competition from book discounters like

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During the quarter the company announced that it

purchased its College Booksellers

from its chairman.

For the third quarter, the company expects comparable store sales at Barnes & Noble stores to decline 1% to 3% and continues to expect full-year same-store sales down between 3% and 5%.

Management said it will update its guidance once the acquisition of College Booksellers is complete. It previously forecast full-year earnings in the range of $1.10 to $1.40 a share.

--Reported by Jeanine Poggi in New York

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