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Barnes & Shrinks Loss, but Revenue Drops Too

The company says it is moving toward profitability, but it expects to lose money this year.

Barnes & (BNBN) shrank its first-quarter loss despite declining sales, the company reported on Wednesday.

The online bookseller lost $13.1 million, or 8 cents a share, in the quarter. That was down from the $20.5 million, or 13 cents a share, loss the company posted in the year-ago quarter.

Revenue in the quarter fell less than 1% to $106 million. No analysts surveyed by Thomson Financial/First Call estimated the company's earnings in the quarter.

"We are pleased with our first-quarter results, as we made significant progress towards our goal of profitability," said Marie Toulantis, Barnes &'s chief executive officer.

But the company projects continuing losses for the current quarter and the full year. In the second quarter, Barnes & expects to lose 10 to 12 cents a share on sales of $80 million to $85 million. For the full year, the company expects losses of 28 to 34 cents a share on $415 million to $450 million in sales.

Barnes &'s first-quarter revenue was affected by a sharp decline in corporate sales. Such sales fell 43.8% to $6.4 million.

In contrast, the company's consumer sales increased 4.7% to $99.5 million.

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While overall revenue fell, the company also cut back on its cost of sales and operating costs.

Barnes &'s gross margin, which measures the difference between what the company charges consumers for its goods and what it pays its suppliers for them, increased 2.8 percentage points to 24.5% of revenue. Meanwhile, the company's operating expenses fell 4.6 percentage points to 37.1% of revenue.

The company sharply cut its technology and web development costs in the quarter. Such costs fell 22.8% to $7.4 million. Barnes & also cut its fulfillment and customer service and marketing and sales costs in the quarter. General and administrative expenses rose slightly to $6.4 million.

In April the company relaunched its used-book operation. Similar to an offering by chief rival

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, the new site lists books listed by third-party dealers.

Because the books are now being sold by third parties, in coming quarters Barnes & will only recognize the commissions it earns on each book sold through the service, instead of the full amount for which each book sells. The company expects its sales to decline as a result, although it expects its bottom line to be unaffected or to benefit slightly from the change.