Barnes & Noble (NYSE: BKS) is where I like to chill on the weekends, but I'm not the only one. Baby Boomers and the elderly have voracious appetites for all things literary, helping to make this company the powerhouse it is today. But will it be enough to keep the stock on the shelf or is the Industry's next chapter all about competitors like Amazon (NasdaqGS: AMZN)?

1. BKS operates more than 692 Barnes & Noble bookstores in 50 states*, as well as B. Dalton Bookseller, Doubleday, Bookstop and Bookstar stores, giving them considerable leverage on the prices publishers charge them.
2. BKS currently controls 17 percent of the book market in the U.S., an area less tied to discretionary income in my opinion.
3. Online competition really has not dented their sales. Based on this year's projections, stores have enjoyed an 80 percent rise in total sales ever since Amazon came out.
4. BKS has stores in some of the finest national real estate locations, and many of them are embedded with addictive Starbucks cafes.
5. BKS is eradicating the wholesale middlemen by buying more books directly from publishers, thus helping profit margins.

* As of the third quarter in 2006.

1. Barnesandnoble.com is only minimally profitable. For the third quarter in 2006, online sales declined half of a percent to $95.8 million.
2. Online competitors are a threat. They avoid the cost of retail locations by sending products directly from their warehouses.
3. An analyst, Gary Balter of Credit Suisse, recently downgraded the stock, lowering his rating to "Underperform", and his target price to $33 from $40.
4. In the big-box retailing universe, places like Wal-Mart and Costco often sell books for larger discounts than BKS can.
5. Dude, books are not a business that is going to grow double digits, and the "MySpace generation" rarely reads books unless they are coerced.

Have sites like Amazon and YouTube made the old-fashioned bookstore a relic? Barnes & Noble bookstores are nice places to browse magazines and have a cup of coffee, but consumers might not continue buying their books there. The company may be the largest bookseller in the U.S., but is the stock a bestseller?

1. BKS stores hosted over 100,000 community events last year, helping make them the second-largest chain of coffeehouses in the U.S.
2. Barnesandnoble.com is the best online bookseller for quality according to a recent survey by Harris Interactive.
3. Third-quarter earnings show that Barnes & Noble store sales increased 4 percent over the same quarter last year.
4. BKS is expanding on the web with online book clubs, widening their consumer base to younger and older generations alike.
5. An analyst from SunTrust Robinson Humphrey recently upgraded the stock from "Buy" to "Neutral" because sales trends in the book sector improved significantly.

1. The winter holiday shopping season is generally the company's only consistently profitable quarter per year, and the 2006 third-quarter net losses hit $2.8 million--this is not a growth stock.
2. There have been no insider purchases of this stock in the last nine months, and several officers have made some pretty hefty sales.
3. BKS depends on bestsellers for at least 3 percent of total sales. A 14 percent decrease in second-quarter sales this year was blamed on the lack of a new Harry Potter book.
4. The stock trades at a P/E ratio above 18, which is almost 8 points below the industry average, and less than a third of Amazon. Investors are willing to pay more for the earnings at Amazon.
5. BKS added 11 new expensive retail stores in the third quarter of 2006, but had to close 6 underperforming locations.

Editor's Note: brass is a quarterly publication, and as such, there could be significant information, news, or price changes that may differ from resources available at the time this article was written. All analysis is meant for educational purposes. You should not make decisions based on information contained in brass without the advice of a qualified professional advisor.

Sources: barnesandnoble.com; barnesandnobleinc.com; bn.com/bookclubs; census.gov; biz.yahoo.com; seekingalpha.com; harrisinteractive.com; infopedia.com; morningstar.com; census.gov; smartmoney.com; hoovers.com; finance.yahoo.com