Branching out in that way would mean death for a normal bookstore, because brand extension is almost never a good idea--when you're "about" too many things, you're not really about anything anymore. In the case of Deseret Book, however, their primary product is mormon culture, and the actual products involved are secondary. You go to B&N because you want a book; you go to DB because you're a Mormon. That's the image they have always tried to foster, and that's their main marketing strategy.
What that means practically is that any competition at all is bad--their image relies on the fact that there is no competition at all. The very existence of Seagull is a sign that DB is not "the" mormon bookstore, merely "a" mormon bookstore. Normally this would not be a problem, but DB's marketing premise is very shaky. What they need to do is redefine what they do and who they are--they need to be about "quality" or "convenience" or "low prices" or something like that, because being about "mormonism" is impossible to sustain in a free market.