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Barnes & Noble Third Quarter Results Show Small Increase

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MAIN NEWS HEADLINES
November 23 – November 30, 2006 Edition

Barnes & Noble

Reports Preliminary

3rd Quarter Results

NEW YORK, NY/11/16/06—Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller showed a small overall sales increase of 3% for the third quarter ending October 28 to $1.1 billion in preliminary reporting. Brick-and-mortar store sales increased 4% to $972.1 million, with comparable store sales increasing 2.0% for the quarter.

B. Dalton sales were $20.5 million for the quarter, a 28% decrease due to store closings and a 5.0% comparable store sales decline. Barnes & Noble.com sales (online) were $95.8 million for the quarter, a 0.5% comparable sales decline compared to the prior year period.

The company also declared a quarterly cash dividend of $0.15 per share for stockholders of record at the close of business on December 8, 2006, payable on December 29, 2006.

Bestselling titles during the quarter included Dianne Setterfield’s The Thirteenth Tale, Mitch Album’s For One More Day, Barack Obama’s The Audacity of Hope, Lemony Snicket’s The End and John Grisham’s The Innocent Man.

Third quarter preliminary net losses were $2.8 million or $0.04 per share, in-line with company guidance of a loss of $0.04 to $0.08 per share. Third quarter results include a $0.03 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” (SFAS 123(R)), and began expensing stock options at the beginning of fiscal year 2006.

The company will not finalize its financial results and the related financial statements until the special committee of its Board of Directors has completed its internal review of the company’s historical option grant practices with the assistance of independent legal counsel, and until it has determined what, if any, impact the results of that investigation will have on its financial statements.*

Barnes & Noble expects sales to be flat for the fourth quarter and for the entire year, or to increase slightly over the previous year.

Barnes & Noble, Inc.’s fourth quarter earnings per share are expected to be in a range of $1.86 to $1.96. The company continues to expect full year earnings per share to be in a range of $2.20 to $2.30.

As of October 28, 2006, the company operated 692 Barnes & Noble stores and 109 B. Dalton stores. During the third quarter, 11 Barnes & Noble stores were opened and six were closed. Three B. Dalton stores were closed during the quarter.

*Additional Background (See Authorlink 8/24/2006):

Barnes & Noble was subpoenaed in late August 2006 by the U.S. Attorney for the Southern District of New York to inquire into its stock option practices. The company has also been under informal investigation by the Securities and Exchange Commission since July, when B&N launched its own internal review of its stock-options granting program after Timothy Hill, a shareholder, filed a lawsuit claiming wrongful stock-options granting practices.

The SEC and the Justice Department are investigating some 70 or 80 companies to find whether the organizations have manipulated the exercise of stock options by employees. The companies are under scrutiny for possibly having backdated the dates options were granted to a low point for each company’s stock price, making stocks less expensive to buy. The stockholders then can sell their shares at higher market prices for a fat profit. If a company discloses the backdating to shareholders and the board approves, then the move is legal. But in some cases companies may have violated government accounting and tax laws.