Barnes & Noble (NYSE: BKS), a bookseller that competes with Borders Group (NYSE: BGP), Amazon (NASDAQ: AMZN), and retailers that stock books such as Wal-Mart (NYSE: WMT), did not do well during the third quarter. Total sales decreased over 4%. A GAAP loss of $0.34 per share was reported versus a GAAP profit of $0.07 per share in the year-ago period. On an adjusted basis, the loss of $0.21 per share missed the call by $0.05, according to this source.

Okay, is it me, or do these numbers basically broadcast loud and clear that Barnes & Noble is not worth one penny of your investment capital? Besides the above, same-store sales took a big dive of 7.4%. That should be the last nail in the coffin of the current Barnes & Noble story, one that reads like a Stephen King novel. Actually, though, it isn't. Another nail to add would be the fact that guidance has been adjusted lower by management. Now, according to CEO Steve Riggio, gross margins are doing okay. I'll skip that chapter, though, as there isn't much substance to it. Who cares about the gross margin at this point. With traffic down and probably due to get worse, a positive tale of the gross margin isn't going to make me want to buy Barnes & Noble as a value play.

Book seller Barnes & Noble Inc. (NYSE: BKS) pulled a rabbit out of its own hat and posted diluted EPS of $0.26 in 2Q 2007 last week. But there is always a catch. $0.12 of those earnings derived from a tax benefit and $0.03 derived from lower than expected costs related to closing a huge distribution warehouse. Net earnings for the quarter were just over $18 million or $0.12 per share. Total sales increased 7.6% to $1.2 billion. In-store sales were up 4.4% while online sales were up 18%. Enjoy these increases while they last. Almost all of the good news is a result of the release of the last Harry Potter installment. Barnes & Noble sold just over 2 million copies of the title as of early August. Without Harry Potter, sales increased barely 1%.

Bricks and mortar book stores are a mature business. Possibilities for growth are very hard to come by. CEO Steve Riggio admits as much even while trying to sound upbeat about 3Q releases planned by former President Clinton, former Fed Chair Greenspan and musician Eric Clapton. No offense to these gentlemen, but Harry Potter they ain't. 3Q store sales are forecast to be flat with a loss per share of $0.06-$0.10. Barnes & Noble also posted losses in 1Q, so an increase in FY guidance to $1.69-$1.87 from $1.49-$1.67 is puzzling. Perhaps management is expecting a huge 4Q surge in book buying for the December holidays. Guess they missed the recent report stating 25% of adults surveyed in the U.S. read ZERO books the previous year.

The company is still buying back its shares, adding 500,000 repurchased shares in 2Q to the 750,000 shares repurchased in 1Q. Barnes & Noble has budgeted $400 million for stock buy backs. The stock is surprisingly volatile. It began the year trading at $40.29, hit $42.88 in May, but closed at $35.80 on 27 August. By all means, shop at Barnes & Noble, but spend investment dollars elsewhere.