Barnes & Noble Reports Fiscal 2010 Second Quarter Financial Results

Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for its fiscal 2010 second quarter ended October 31, 2009. Additionally, the company also announced that its Board of Directors has declared a quarterly cash dividend of $0.25 per share payable on December 31, 2009 to stockholders of record on December 10, 2009.

Total sales for the second quarter were $1.2 billion, a 4% increase compared to the prior year. Barnes & Noble store sales decreased 2% to $950 million, with comparable store sales decreasing 3.2% for the quarter. Barnes & Noble.com sales were $120 million for the quarter, a 9% increase compared to the prior year. Total sales include Barnes & Noble College Bookstore (“College”) sales of $65 million for the period of September 30, 2009 (date of acquisition) through October 31, 2009. College’s comparable store sales decreased 0.2% during that same period.

The second quarter net loss was $24.0 million, or $0.43 per share. Included in the net loss were one-time transaction expenses of $0.13 per share associated with the College acquisition.

Bestselling titles during the quarter included Dan Brown’s The Lost Symbol, Jeff Kinney’s Dog Days (Diary of a Wimpy Kid Series #4), Mitch Albom’s Have a Little Faith, Vince Flynn’s Pursuit of Honor, Malcolm Gladwell’s What the Dog Saw and Edward Kennedy’s True Compass.

GUIDANCE

For the company’s fiscal 2010 third quarter ending January 30, 2010, comparable store sales at Barnes & Noble stores are expected to decline 1% to 3%. The company continues to expect full-year comparable store sales to decline 2% to 4%. College’s comparable store sales are expected to be in a range of 0% to 2% for the third quarter and to be in a range of 1% to negative 1% from the acquisition date to the end of fiscal 2010.

Owing to the overwhelming customer demand for nook ^TM, the world’s most advanced eBook reader, the company is ramping up its production schedule, incurring higher production costs than originally anticipated and increasing future investments related to its digital strategy, including additional people, technology and in-store marketing support. In addition, the company expects that general retail traffic will remain challenged during the holiday selling season. As a result of the above factors, the company is lowering its full year earnings per share forecast to be in a range of $0.33 to $0.63, from its previous forecast of $0.59 to $0.89. Third quarter earnings per share are expected to be in a range of $1.30 to $1.50.

As of October 31, 2009, the company operated 725 Barnes & Noble stores, 636 Barnes & Noble College Bookstores and 50 B. Dalton stores. During the second quarter, four Barnes & Noble stores were opened and three were closed.

A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 11:00 A.M. ET on Tuesday, November 24, 2009, and is accessible at www.barnesandnobleinc.com/webcasts.

Barnes & Noble, Inc. will report third quarter results on or about February 23, 2010.

ABOUT BARNES & NOBLE, INC.

Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller and a Fortune 500 company, operates 775 bookstores in 50 states. Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of Barnes & Noble, also operates 636 college bookstores serving nearly 4 million students and over 250,000 faculty members at colleges and universities across the United States. Barnes & Noble is the nation’s top bookseller brand for the sixth year in a row, as determined by a combination of the brand’s performance on familiarity, quality, and purchase intent; the top bookseller in quality for the second year in a row and the number two retailer in trust, 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, which also features hundreds of thousands of titles in its eBookstore ( www.bn.com/ebooks). Customers can buy and read eBooks on a wide range of platforms, including the iPhone and iPod touch, BlackBerry ^® smartphones, as well as most Windows ^® and Mac ^® laptops or full-sized desktop computers.

General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company’s corporate website: www.barnesandnobleinc.com.

nook is a trademark of Barnes & Noble, Inc.

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SAFE HARBOR

This press release contains “forward-looking statements.” Barnes & Noble is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, decreased consumer demand for the company’s products, possible disruptions in the company’s computer or telephone systems, possible risks associated with data privacy and information security, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company’s online and other initiatives, the performance and successful integration of acquired businesses, the success of the company’s strategic investments, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, the results or effects of any governmental review of the company’s stock option practices, product shortages, and other factors which may be outside of the company’s control. Please refer to the company’s annual, quarterly and periodic reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.

BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
		13 weeks ended				13 weeks ended			26 weeks ended				26 weeks ended
		October 31, 2009				November 1, 2008			October 31, 2009				November 1, 2008
Sales		$	1,160,895			1,113,317			$	2,316,576			2,334,306
Cost of sales and occupancy			818,706			777,194				1,618,532			1,623,784
Gross profit			342,189			336,123				698,044			710,522
Selling and administrative expenses			324,144			313,432				612,795			613,224
Depreciation and amortization			49,169			44,213				94,022			86,698
Pre-opening expenses			1,284			3,310				2,983			6,476
Operating profit (loss)			(32,408	)		(24,832	)			(11,756	)		4,124
Interest expense, net			3,945			1,311				4,248			2,398
Income (loss) from continuing operations before taxes			(36,353	)		(26,143	)			(16,004	)		1,726
Income taxes			(12,421	)		(10,438	)			(4,311	)		730
Income (loss) from continuing operations (net of income tax)			(23,932	)		(15,705	)			(11,693	)		996
Loss from discontinued operations (net of income tax)			-			(2,468	)			-			(3,828	)
Net loss			(23,932	)		(18,173	)			(11,693	)		(2,832	)
Net (income) loss attributable to noncontrolling interests			(25	)		(247	)			4			(177	)
Net loss attributable to Barnes & Noble, Inc.		$	(23,957	)		(18,420	)		$	(11,689	)		(3,009	)
Income attributable to Barnes & Noble, Inc.
Income (loss) from continuing operations		$	(23,932	)		(15,705	)		$	(11,693	)		996
Less (income) loss attributable to noncontrolling interests			(25	)		(247	)			4			(177	)
Net income (loss) from continuing operations attributable to Barnes & Noble, Inc.		$	(23,957	)		(15,952	)		$	(11,689	)		819
Basic income per common share:
Income (loss) from continuing operations attributable to Barnes & Noble, Inc.		$	(0.43	)		(0.29	)		$	(0.21	)		0.02
Loss from discontinued operations attributable to Barnes & Noble, Inc.			-			(0.05	)			-			(0.07	)
Net loss attributable to Barnes & Noble, Inc.		$	(0.43	)		(0.34	)		$	(0.21	)		(0.05	)
Diluted loss per common share:
Income (loss) from continuing operations attributable to Barnes & Noble, Inc.		$	(0.43	)		(0.29	)		$	(0.21	)		0.02
Loss from discontinued operations attributable to Barnes & Noble, Inc.			-			(0.05	)			-			(0.07	)
Net loss attributable to Barnes & Noble, Inc.		$	(0.43	)		(0.34	)		$	(0.21	)		(0.05	)
Weighted average common shares outstanding
Basic			55,230			54,411				55,208			54,306
Diluted			55,230			54,411				55,208			54,306
Dividends declared per common share		$	0.25			0.25			$	0.50			0.50
Percentage of sales:
Sales			100.0	%		100.0	%			100.0	%		100.0	%
Cost of sales and occupancy			70.5	%		69.8	%			69.9	%		69.6	%
Gross profit			29.5	%		30.2	%			30.1	%		30.4	%
Selling and administrative expenses			27.9	%		28.2	%			26.5	%		26.3	%
Depreciation and amortization			4.2	%		4.0	%			4.1	%		3.7	%
Pre-opening expenses			0.1	%		0.3	%			0.1	%		0.3	%
Operating profit (loss)			-2.8	%		-2.2	%			-0.5	%		0.2	%
Interest expense, net			0.3	%		0.1	%			0.2	%		0.1	%
Income (loss) from continuing operations before taxes			-3.1	%		-2.3	%			-0.7	%		0.1	%
Income taxes			-1.1	%		-0.9	%			-0.2	%		0.0	%
Income (loss) from continuing operations (net of income tax)			-2.1	%		-1.4	%			-0.5	%		0.0	%

BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
		October 31, 2009				November 1, 2008			May 2, 2009
ASSETS
Current assets:
Cash and cash equivalents		$	95,727			16,123			86,594
Receivables, net			146,035			94,511			70,721
Merchandise inventories			1,730,876			1,502,854			1,233,756
Prepaid expenses and other current assets			101,556			121,418			121,563
Current assets of discontinued operations			-			60,402			-
Total current assets			2,074,194			1,795,308			1,512,634
Property and equipment:
Land and land improvements			9,298			9,324			9,298
Buildings and leasehold improvements			1,212,259			1,097,879			1,102,439
Fixtures and equipment			1,563,163			1,355,932			1,331,524
			2,784,720			2,463,135			2,443,261
Less accumulated depreciation and amortization			1,932,410			1,633,744			1,642,517
Net property and equipment			852,310			829,391			800,744
Goodwill			524,060			239,311			254,842
Intangible assets, net			587,913			84,580			82,691
Other noncurrent assets			68,854			8,207			13,368
Noncurrent assets of discontinued operations			-			25,452			-
Total assets		$	4,107,331			2,982,249			2,664,279
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,279,257			906,071			698,315
Accrued liabilities			716,685			562,848			587,454
Current liabilities of discontinued operations			-			62,206			-
Total current liabilities			1,995,942			1,531,125			1,285,769
Long-term debt			325,000			126,500			-
Deferred taxes			281,668			70,362			79,369
Other long-term liabilities			626,717			391,250			387,318
Noncurrent liabilities of discontinued operations			-			9,258			-
Shareholders' equity:
Common stock; $.001 par value; 300,000 shares
authorized; 88,461, 87,637 and 88,225
shares issued, respectively			88			88			88
Additional paid-in capital			1,277,674			1,257,744			1,274,454
Accumulated other comprehensive loss			(12,015	)		(11,044	)		(12,015	)
Retained earnings			661,481			654,231			697,042
Treasury stock, at cost, 33,213, 33,061
and 33,148 shares, respectively			(1,050,802	)		(1,047,443	)		(1,049,328	)
Total Barnes & Noble, Inc. shareholders' equity			876,426			853,576			910,241
Noncontrolling interest			1,578			178			1,582
Total shareholders' equity			878,004			853,754			911,823
Commitments and contingencies			-			-			-
Total liabilities and shareholders' equity		$	4,107,331			2,982,249			2,664,279