Barnes & Noble Profit Up

Spellbound Harry Potter fans helped Barnes & Noble Inc. post a 54% increase in quarterly profit Thursday, but the nation’s largest bookseller warned that its third quarter would be hexed with a loss.

Shares fell 5%.

The New York-based company’s second-quarter net income rose to $13.5 million, or 18 cents a share, from $8.7 million, or 12 cents a share a year earlier. Analysts polled by Thomson Financial had expected 20 cents a share for the quarter.

Sales for the quarter ended July 30 were $1.17 billion, up 6.4% over a year earlier and nearly in line with the $1.18 billion expected by analysts.

But Barnes & Noble said opening a new distribution center would help produce a loss of 1 cent to 4 cents a share in the third quarter. Analysts expected a profit of 2 cents a share.

“The third quarter is ... when you typically build up for the holiday season. It’s just that this year we have some extra cost,” said Joseph Lombardi, the bookseller’s chief financial officer.

For the full year, Barnes & Noble forecast earnings of $1.94 to $1.98 a share. Analysts were expecting $1.98.

The company’s shares slid $2.06 to $37.40, but still are up 16% this year.

Barnes & Noble’s report followed disappointing news from rival Borders Group Inc., which on Tuesday announced a lower second-quarter profit and also reduced its full-year profit outlook.

“Harry Potter and the Half-Blood Prince,” which debuted July 16, accounted for about 3% of sales at stores open at least a year, Barnes & Noble said. It sold 1.3 million copies of the book in its first week.

But the book was widely discounted -- Barnes & Noble sold it for about 40% off the published price.

“The bestsellers are not very profitable for them,” said portfolio manager James McBride of Overland Park, Kan.-based Trendstar Advisors, which owns about 145,000 shares of Barnes & Noble. “What they want is to increase traffic in the stores.”

Barnes & Noble also said it did not have any adult hits in the second quarter on the magnitude of Bill Clinton’s autobiography “My Life” and the Dan Brown mystery-thriller “The Da Vinci Code” last year.

Times wire services were used in compiling this report.