Barnes & Noble suspends dividend; profit falls short

NEW YORK (Reuters) - Barnes & Noble Inc suspended its dividend to preserve its dwindling cash and declined to give a sales forecast for the current quarter, sending its shares down 8 percent.

Barnes & Noble, which put itself up for sale last summer, reported a lower-than-expected profit for the holiday quarter despite a sales increase as the top U.S. bookstore chain continued to invest in developing its e-books strategy, led by its Nook e-reader.

The company said it had $26.5 million in cash and cash equivalents on hand as of January 29, down from $40.2 million a year earlier.

Barnes & Noble suggested that going-out-of-business sales by rival Borders Group could pressure its results in the short term, prompting its decision not to forecast sales and profits for the current quarter.

Borders filed for Chapter 11 bankruptcy protection last week and said it would close at least 40 percent of its 500 superstores.

Borders' sales declines in recent years have been far more pronounced than Barnes & Noble's. But analysts last week said a smaller Borders chain would give Barnes & Noble only a little breathing room to further implement its e-book strategy.

Barnes & Noble said it would suspend its quarterly dividend of 25 cents per share to invest in its digital book strategy, a move Wall Street analysts applauded.

Morningstar analyst Pete Wahlstrom said if the company hadn't done so, analysts and investors would be asking, "If digital is so important, why are you shipping $57 million out the door annually in the form of a dividend instead of investing that cash?"

Barnes & Noble introduced the Nook in 2009 to compete with Amazon.com Inc's market-leading Kindle e-reader. The Nook has become the second most popular e-reader, but developing and improving it have dented B&N results in recent quarters.

The bookseller reported a profit of $60.6 million, or $1.00 per share, for the fiscal third quarter ended January 29, down 24.7 percent from $80.4 million, or $1.38 a share, a year earlier. Analysts on average were expecting $1.13 per share, according to Thomson Reuters I/B/E/S.

Barnes & Noble said sales at its namesake superstores open at least 15 months rose 7.3 percent over the holidays, led by the popularity of the Nook. The company operates 717 superstores.

Sales at its College bookstore chain, which it bought from Chairman and founder Leonard Riggio for $514 million in 2009, fell 2.2 percent. That business accounts for just under a quarter of the company's sales.

Overall third-quarter sales were up 6.9 percent at $2.3 billion.

B&N shares were down $1.50 to $17.11 in morning trading.

(Reporting by Phil Wahba; Editing by Lisa Von Ahn and John Wallace)