Barnes & Noble's most loyal customers are hurting business

Barnes & Noble’s Nook business is bleeding cash.

The bookstore chain’s e-reader has cost the company $39 million in the past year, executives said on a recent conference call with analysts.

The Nook continues to put a damper on Barnes & Noble’s profitability even though the company’s same-store sales are actually up.

In this case, the loyalty of Nook customers is actually hurting the company’s business.

Barnes & Noble can’t abandon its Nook business because fans of the e-reader are avid customers, Gabelli & Co. analyst John Tinker told CBS Moneywatch.

“You cannot just walk away from them,” Tinker said.

If Barnes & Noble eliminated the Nook, it could risk alienating many of its customers forever.

The Nook business has struggled to compete with Amazon’s Kindle. Barnes & Noble is constantly investing in new iterations of the Nook with up-to-date technology. It also sells many e-books at a loss to compete with Amazon’s lower prices.

Barnes & Noble is currently looking to cut costs in the e-reader department.

Barnes & Noble is also going to open smaller-format stores that will cost less to operate.

It plans to close 10 of its less profitable large stores in the coming year.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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