It’s not time to close the book on Barnes & Noble just yet. But its story is taking a turn for the worse: Investors this morning responded to a surprisingly weak earnings report for the quarter that ended in October by driving the stock down about 22% to a 52-week low.

The challenges re-launching BN.com to also handle sales of Nook ebooks “were greater than anticipated and reduced traffic as well as conversion,” CEO Ronald Boire told analysts. And sales at stores open at least a year fell 1%.

He called the downturn in Nook sales “clearly unacceptable” and vowed to generate “material improvement in the Nook operating costs.”

The good news? B&N is selling more toys and games — sales improved 14.9% vs the same period last year — and “we see prospects for further growth.” Oh, and in books “we continue to experience the growing trend in adult coloring books and artist supplies” which “helped offset” declining sales of young adult titles compared to last year which included Heroes of Olympus, If I Stay and Maze Runner.

B&N has been struggling to adjust to the growth of ebook sales, and online sales of physical books — two categories that Amazon dominates.

All told, B&N lost $39.2 million in the quarter — including a $10.5 million executive severance charge from the spin off this summer of its college-focused Barnes & Noble Education operation — compared to a $12.3 million profit last year.  Revenues at $894.7 million fell 4.5%. The top line was far below the $1.42 billion consensus projection among the two analysts Thomson/First Call counts covering the once-mighty book retailer.

Retail revenues at $861 million were down 3.1% as online sales fell and the chain closed stores.

Sales in the current quarter through Black Friday were up 1.1%, not including Nook products. But for the fiscal year ending in early May B&N expects flat sales at stores open at least a year, which would up up 1% without Nook products.

“Barnes & Noble has a customer base unlike almost any other retailer and our stores have become community centers across America,” says Boire, who took charge in July. “Barnes & Noble is a destination for personal development, learning and entertainment and I could not be more excited as we look ahead at our opportunities for future growth.”