Barnes & Noble Reports Sluggish Second Quarter Sales

August 24, 2006
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August 24 – August 31, 2006 Edition

Barnes & Noble

Reports Sluggish

Second Quarter Sales

NEW YORK, NY/8/17/06—Barnes & Noble, Inc. (NYSE: BKS) has reported sales and earnings for the second quarter ended July 29, 2006.

Sales for the second quarter decreased 1% to $1.2 billion largely due to last year’s record breaking sales of Harry Potter and the Half-Blood Prince. Barnes & Noble store sales of $1.0 billion were flat compared to a year ago, with comparable store sales decreasing 2.6% for the quarter. B. Dalton sales were $21.9 million for the quarter, a 31% decrease compared to the prior year due to store closings and a 9.1% comparable store sales decline.

Sales at Barnes & Noble.com were $82.7 million, a decline of 14% compared to the prior year period.

Bestselling titles during the quarter included Kim Edwards’ The Memory Keeper’s Daughter, Al Gore’s An Inconvenient Truth, Fannie Flagg’s Can’t Wait to Get to Heaven and Anderson Cooper’s Dispatches from the Edge.

In addition, the company also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share for stockholders of record at the close of business on September 8, 2006, payable on September 29, 2006.

Second quarter net earnings were $16.6 million or $0.24 per share, in-line with company guidance of $0.22 to $0.26 per share. Second quarter results include a $0.04 per share impact due to stock compensation expense as the company has adopted Statement of Financial Accounting Standards No. 123(R) (As Amended), “Share-Based Payment,” and began expensing stock options at the beginning of fiscal year 2006.

The company acquired approximately 677,000 shares for $26 million and approximately 2.8 million shares for $119 million under its share repurchase program in the second quarter and year-to-date, respectively.

For the third quarter, the company expects comparable store sales at Barnes & Noble stores to range from flat to an increase in the low-single digits. The company continues to expect full year comparable store sales to increase in the low single digits.

Barnes & Noble, Inc.’s third quarter loss per share is expected to be in a range of $0.04 to $0.08, which includes stock compensation expense of $0.04 per share. The company continues to expect full year earnings per share to be in a range of $2.20 to $2.30, which includes stock compensation expense of $0.15 per share.

As of July 29, 2006, the company operated 687 Barnes & Noble stores and 112 B. Dalton stores. During the second quarter, four Barnes & Noble stores were opened and one was closed. One B. Dalton store was closed during the quarter.

Barnes & Noble, Inc. will report third quarter earnings on or about November 16, 2006.

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