Friday, July 07, 2006

Calls of Note Part 4

- Stifel is lowering their 2Q06 EPS estimate on Barnes & Noble (NYSE:BKS)from $0.23 to $0.21, below Street consensus ($0.24) and management's guidance range of $0.22-$0.26. Firm believes sales trends have remained lackluster due to a soft bestseller release schedule across books and music. Management had previously indicated softening sales trend commencing late-April with a modest recovery in early May. Trends in July likely exacerbated by lapping Harry Potter in the year- ago period (July 16, 2005).

Firm's Hold rating centers on belief that the company's dominant market share continues to be implied in the model (reflecting 16x FY06 P/ E estimate and 5.2x FY06 EV/EBITDA estimate). While they see positive gross margin trends continuing in the near term, they are mindful of the improving competition from Borders (remodels and loyalty card momentum).

Notablecalls: I believe this is an actionable call.

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