Barnes & Noble Inc cut its full-year forecast on expectations of a tough holiday season and high costs for its Nook electronic reader, while rival Borders Group Inc posted a wider-than-expected loss. Shares of both booksellers fell sharply.

Barnes and Borders are caught in a holiday book price war between Inc and Wal-Mart Stores Inc as they try to compete with the move of book sales online.

Shares of Barnes & Noble fell 6.5 percent, while Borders dropped 9.0 percent.

Barnes & Noble, the largest U.S. bricks and mortar bookseller with 775 stores, reported a quarterly loss that was in line with analysts' expectations, but lowered its full-year outlook.

The company said last week that it had sold out of its Nook e-readers due to high demand, which could hurt its sales while benefiting Amazon, which sells the market-leading Kindle.

Industry experts have said that electronic readers sold by Amazon, Sony Corp <6758.T>, Barnes & Noble and others will be top-selling electronic gadgets for the holidays.

Barnes & Noble said on Tuesday that it was accelerating its production schedule for the Nook and would incur higher costs.

The Nook costs and expectations of a tough holiday shopping season prompted Barnes & Noble to lower its full-year earnings-per-share forecast to a range of 33 cents to 63 cents, the company said. It previously had expected 59 cents to 89 cents.

Barnes & Noble said its loss had widened to $24.0 million, or 43 cents per share, in the second quarter ended October 31 from $18.4 million, or 34 cents per share, a year earlier.

Excluding one-time transaction expenses from the acquisition of Barnes & Noble College Booksellers in September, the company said it had lost 30 cents per share. That was in line with analysts' expectations, according to Thomson Reuters I/B/E/S.

Sales rose 4 percent to $1.16 billion from $1.11 billion.


Borders' loss from continuing operations was far larger than what Wall Street analysts had expected. Sales at stores open for at least a year fell 12.1 percent at its Borders Superstores and 7.2 percent at its Waldenbooks stores.

Same-store sales, excluding multimedia, were down 8.5 percent.

Earlier in November, Borders said Waldenbooks would become a smaller, more-profitable chain in 2010 as it planned to cut 200 stores. It also said it would cut 1,500 positions, most of which are part-time.

Borders provided no outlook for the holiday season, but appeared to be ramping up at its Superstores sites.

We increased core book inventories, experimented with a range of traffic-driving and in-store promotions and invested in store payroll to get books out on the shelves and our stores in top condition to receive customers, Chief Executive Ron Marshall said in a statement.

Borders' loss from continuing operations was $39 million, or 65 cents per share, in the third quarter ended October 31.

Analysts on average had forecast a loss of 45 cents a share, according to Reuters I/B/E/S. Overall sales fell 12.7 percent to $595.5 million from $682.1 million.

(Additional reporting by Nicole Maestri in San Francisco; Editing by Lisa Von Ahn)