NEW YORK (AP) -- Barnes & Noble Inc. reported a 9 percent decline in fourth-quarter earnings Thursday amid a challenging retail environment, but the nation's largest book seller boosted dividends and surprised Wall Street with predictions of a profitable first quarter.
The report followed a dreary news from rival Borders Group Inc., which said it may put itself up for sale and has lined up $42.5 million in outside financing to help fund operations. In a conference call with investors Thursday, Barnes & Noble told analysts that it had not been approached by Borders, but if it were, it would take a "good look" at the company.
Barnes & Noble said that it earned $115.04 million, or $1.79 per share, in the three-month period ended Feb. 2, compared with $126.73 million, or $1.83 per share in the year-ago period. Analysts polled by Thomson Financial expected $1.71 per share.
The company got a non-operating boost worth 10 cents per share from property insurance and legal settlements that totaled $6.3 million. Barnes & Noble said it would increase its quarterly cash dividend to 25 cents per share, from 15 cents.
Barnes & Noble shares jumped 6.8 percent, or $1.89, to $29.89 in late morning trading Thursday. Borders' stock plummeted 26 percent, or $1.85, to $5.25.
Barnes & Noble says that sales slipped to $1.85 billion in the period, from $1.88 billion in the year-ago period. Same-store sales fell 0.5 percent in the fourth quarter. The company expects that same-store sales in the first quarter will be "slightly negative."
The company expects earnings of 5 to 10 cents per share in the current quarter. Analysts had expected a loss of 2 cents per share.
Both Barnes & Noble and Borders have lost market share from aggressive discounting from online retailer Amazon.com and discounters like Target Corp. and Wal-Mart Stores Inc.
For the year, Barnes & Noble earnings slipped to $135.8 million, or $2.03 per share, compared to $150.53 million, or $2.17 per share, in the year-ago period. Sales reached $5.4 billion, from $5.26 billion in the previous year.