Barnes & Noble (NYSE: BKS) had a disappointing holiday season that puts the chain's long-term viability in doubt.

The bookseller reported a 9.1% drop in comparable-store sales for the nine-week holiday period that ended on Dec. 31. Online sales, however, were up 2% year over year for the period.

"Although books outperformed the company as a whole, we were not pleased with our results," said CEO Len Riggio in a press release. "Fortunately, post-holiday traffic and sales have improved and we are optimistic for the remainder of the fiscal year, and we believe this most unusual retail season may be behind us."

Despite the sales dip, the company still expects to exceed the previous fiscal year's operating profit due to "strong expense management."

What went wrong?

You can manage expenses to save money, but that does not create sales. During the holiday period, Barnes & Noble simply did not have enough traffic in its stores. The chain acknowledged that in its press release, and also cited declining sales in coloring books and art supplies as being partly responsible for the drop. Last year, adult coloring books were a fad, but it's one that appears to have passed.

In addition, the company noted that in the 2015 holiday season, it was selling a new album by Adele. That CD was the biggest-selling album in the chain's history, and there was nothing comparable during this most-recent holiday season.

What happens next?

Barnes & Noble now forecasts consolidated EBITDA will come in at the low end of the company's previously issued range.

The company expects fiscal 2017 comparable store sales to decline approximately 6% and consolidated EBITDA to be approximately $200 million, excluding the impact of any charges related to its cost reduction initiatives and costs associated with the CEO departure. Fiscal 2017 Retail EBITDA is now expected to be approximately $225 million, while NOOK's EBITDA loss is expected to be approximately $25 million, which includes previously announced transitional costs.

Those are decent numbers, but the drop in customers should be very worrying to investors. At some point, if these declines continue, Barnes & Noble simply won't have enough business to remain a viable concern. Riggio may downplay that by noting post-holiday increases, but the arrow has been moving in the wrong direction for a long time, and nothing the chain has done has seemed to impact that.

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Daniel Kline has no position in any stocks mentioned.

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