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Barnes & Noble First Quarter Slow More Dips Ahead

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MAIN NEWS HEADLINES
May 29 – June 5, 2008 Edition

Barnes & Noble
First Quarter Slow,
More Dips Ahead

NEW YORK, NY/5/22/08–Barnes & Noble, Inc. sales for the first quarter ended May 3, 2008 were up by only 1.1% to $1.2 billion. Barnes Barnes & Noble store sales increased 1.1% to $1.0 billion, with comparable store sales falling 1.5% for the quarter, slightly below guidance for negative comparable store sales. Barnes & Noble.com comparable sales were $99.6 million for the quarter, a 7.2% increase compared to the prior year period.

Bestselling titles during the quarter included John Grisham’s The Appeal, Randy Pausch’s The Last Lecture, Michael Pollan’s In Defense of Food, Sophie Kinsella’s Remember Me? and Jodi Picoult’s Change of Heart.

During a conference call to shareholders for the first quarter report, CEO Steve Riggio strongly urged that the company look for ways to eliminate the traditional returns practice and said a solution might be possible within a year or two. He called the current returns policy “insane” and “expensive.” He said changing the returns policy could reduce costs for both publishers and B&N, and said that in today’s environment publishers might be ready to look seriously at changes in the returns policies.

During the first quarter Barnes & Noble reached an agreement in principle with the State of California (subject to final Board of Equalization review and approval expected at the end of May) to settle its long-standing dispute regarding the collection of sales and use taxes on sales made by Barnes & Noble.com from 1999 to 2005. As a result, the company recorded a one-time pre-tax charge of approximately $8.3 million.

Including the one-time charge noted above, the first quarter net loss was $2.2 million or $0.04 per share. Excluding the charge, first quarter net earnings on an operating basis were $0.05 per share, at the low end of the company’s guidance of $0.05 to $0.10 per share.

Based on lower than expected first quarter sales results and the overall retail sales environment, the company is lowering its full-year comparable store sales guidance at Barnes & Noble stores from slightly positive to slightly negative. Additionally, due to the difficult comparison against last year’s July release of Harry Potter and the Deathly Hallows, second quarter comparable store sales are expected to decrease in the low to mid-single digits.

Although the company is lowering its sales forecast, it continues to expect full-year earnings per share to be in a range of $1.70 to $1.90 based on a reduced fully diluted share count of 58.5 million shares as a result of the share repurchase activity noted above. Second quarter earnings per share are expected to be in a range of $0.08 to $0.13.

As of May 3, 2008, the company operated 717 Barnes & Noble stores and 83 B. Dalton stores. During the first quarter, eleven Barnes & Noble stores were opened and seven were closed. B. Dalton closed two stores during the quarter.

In the first quarter of 2008, the company acquired 6.5 million shares under its share repurchase program at an average price of $30.57 per share or $199.7 million in total.

In addition, the company also announced that its Board of Directors declared a quarterly cash dividend of $0.25 per share for stockholders of record at the close of business on June 9, 2008, payable on June 30, 2008.

The company will report second quarter earnings on or about August 21, 2008.

Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller and a Fortune 500 company, operates 800 bookstores in 50 states. For the fourth year in a row, the company is the nation’s top bookseller brand, as determined by a brand’s overall strength based on its combination of familiarity, quality and purchase intent, according to the EquiTrend® Brand Study by Harris Interactive®. Barnes & Noble conducts its online business through Barnes & Noble.com (www.bn.com ), one of the Web’s largest e-commerce sites.