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Barnes & Noble Swings to Loss

The company's customer-loyalty program cuts into margins.

Step on it, Harry Potter.

Barnes & Noble

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needs you.

The book-selling giant could have used a little of the boy wizard's magic in the first quarter. The company swung to a loss during the period because of restructuring charges and the impact of its customer-loyalty program.

The New York-based company posted a first-quarter loss of $1.7 million, or 3 cents a share, reversing a year-earlier profit of $10 million, or 14 cents, a year earlier.

The results were better than the company's forecast for a loss of 8 cents to 12 cents a share. However, Barnes & Noble's original guidance included an additional 3 cents a share in charges that were pushed back and now are expected to be recorded in the second and third quarters.

Excluding charges connected with the closing of the company's Internet distribution center and its review of stock option practices, Barnes & Noble would have earned $6.8 million, or 10 cents a share.

Analysts polled by Thomson Financial had expected the company to report a profit of a penny a share.

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Barnes & Noble store sales increased 3.3% to $1 billion. Same-store sales, or sales at stores open at least a year, climbed 1.7%.

The quarter was the first non-holiday period to be affected by the company's membership program, which offers discounts to members on books, CDs and other items.

"As expected, our gross margin declined due to greater discounts given to existing members and from greater usage, as the size of our member base continues to grow," CEO Steve Riggio said in a statement.

Looking ahead to the second quarter, the company said it expects same-store sales at Barnes & Noble stores to increase in the low- to mid-single digits, reflecting the additional sales volume expected with the much-anticipated July 21 release of

Harry Potter and the Deathly Hallows

.

The company forecast second-quarter earnings of 8 cents to 12 cents a share, below Wall Street's of 13 cents a share. The guidance in part reflects the 3 cents in charges, which are tied to store openings and closings, that were delayed from the first quarter.

For the full year, Barnes & Noble predicts earnings of $1.67 to $1.81 a share, excluding charges. Analysts are calling for earnings of $1.72 a share.

Shares were up 99 cents, or 2.4%, to $43.01 in recent trading.