updated 8/18/2005 4:59:57 PM ET 2005-08-18T20:59:57

Barnes & Noble Inc., the nation’s leading bookseller, said Thursday that second-quarter profit rose 55 percent. But its shares fell more than 5 percent on disappointing sales even with a solid performance from the new Harry Potter book.

The company also forecast a loss in the third quarter and said that for the first time it would be paying a dividend — 15 cents per share for shareholders of record as of Sept. 9, payable on Sept. 30.

For the three months ended July 30, net income grew to $13.5 million, or 18 cents per share. That compares with $8.7 million, or 12 cents per share, a year ago. Results included a charge of 2 cents per share from unamortized deferred financing fees; otherwise the company would have posted earning per share of 20 cents, which matched the consensus from analysts surveyed by Thomson Financial.

The company also booked $6.9 million in charges under selling and administrative expenses for legal costs and increased accruals for anticipated settlements from a lawsuit concerning employee wages and other litigation.

Revenue rose 6 percent to $1.17 billion, below the $1.18 billion that analysts were expecting. The company said the strong performance of Harry Potter’s book was offset by lower sales of hardcover best sellers and continued reduced use of book wholesalers.

Same-store sales at Barnes & Noble increased 4.3 percent, while B. Dalton’s same-store sales rose 0.2 percent. Barnes & Noble.com sales grew 14 percent to $96.3 million from a year ago.

Same-store sales are sales at stores opened at least a year and are considered a strong indicator of a retailer’s health.

“The excitement generated by ’Harry Potter and the Half-Blood Prince’ boosted our traffic both in stores and online,” said Steve Riggio, chief executive officer of Barnes & Noble.

The report followed disappointing news from its rival Borders Group Inc., which on Tuesday announced a lower second-quarter profit as international results were hurt by slower sales in Britain, and the company invested in store remodeling and conversions. The company also cut its full-year profit outlook.

For the third quarter, Barnes & Noble forecast a net loss of 1 cents to 4 cents per share, which includes a loss of 3 cents per share connected with a new distribution center that recently became operational. Same-store sales are expected to rise in the mid-single digits.

For the year, Barnes & Noble forecast earnings per share of $1.94 to $1.98, with same-store sales expected to rise about 3 percent.

Analysts estimate earnings per share of 2 cents in the third quarter and $1.98 for the year.

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