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Contact: Mary Ellen Keating, Senior Vice President
Corporate Communications, Barnes & Noble, Inc.                                  
(212) 633-3323
mkeating@bn.com

08/19/2004

BARNES & NOBLE ANNOUNCES SECOND QUARTER RESULTS

Barnes & Noble Comparable Store Sales Increase 1.4%
Full Year Sales and Earnings Guidance Raised

New York, NY (August 19, 2004)—Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for the second quarter ended July 31, 2004.

SECOND QUARTER RESULTS

Barnes & Noble store sales were $961.3 million for the quarter, an increase of 5% over the prior year. Second quarter comparable store sales increased 1.4%. The company opened nine new Barnes & Noble stores and closed five locations ending the quarter with 657 stores.

B. Dalton sales, which comprise approximately 4% of total bookstore sales, were $39.9 million for the quarter, a decrease of (22%) over the prior year, due primarily to store closings. The company closed five stores ending the quarter with 183 stores. Second quarter comparable store sales decreased (6.8)%.

On June 28, 2004, Barnes & Noble announced that it completed the redemption of its $300 million 5.25% convertible subordinated notes due 2009. The unamortized portion of the deferred financing fees from the issuance of the notes and redemption premium resulted in a charge of $14.6 million, or $0.12 per share, during the second quarter. Earnings for the bookstore business were $0.16 per share in the second quarter. Excluding the one-time charge, earnings for the bookstore business were $0.28 per share, versus guidance of $0.17 to $0.19 per share. Bookstore earnings were $0.19 per share in the year-ago period.

"We are pleased at having achieved positive comparable store sales growth in the second quarter given the difficult comparisons to last year’s sales, which were driven by the extraordinary sales of Harry Potter & the Order of the Phoenix and the attendant traffic it generated," said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "We attribute the buoyancy in book sales to the release of a few titles that received major media coverage, most notably President Clinton’s memoir, My Life. The former president’s book became the fastest selling non-fiction book in our history, with sales of over 250,000 copies."

Barnes & Noble, Inc. completed its previously announced merger of Barnes & Noble.com on May 27, 2004. Barnes & Noble.com’s second quarter sales decreased 6% to $84.5 million, resulting in a net loss of ($7.6) million, or ($0.11) per share, versus guidance of ($0.09) to ($0.11) per share. In the year-ago period, net loss was ($0.12) per share on a pro-forma basis, as if Barnes & Noble.com was 100% owned in the prior year.

On August 17, 2004, GameStop, the nation’s largest video-game and entertainment-software specialty retailer, reported sales of $345.6 million for the quarter, an increase of 13% over the prior year period. Second quarter comparable store sales decreased (2.4)%. The company’s share of net earnings was $4.6 million, or $0.07 per share, for the quarter, versus guidance of $0.06 to $0.07 per share. The company’s share of net earnings was $0.06 per share in the year-ago period. GameStop opened 77 stores and closed four, ending the quarter with 1,676 stores.

Consolidated GAAP net earnings for the second quarter was $8.9 million, or $0.12 per share, versus $13.7 million, or $0.20 per share, in the prior year. Consolidated net earnings excluding the one-time charge was $17.6 million, or $0.24 per share, versus guidance of $0.12 to $0.17 per share. In the year-ago period, consolidated net earnings was $0.13 per share on a pro-forma basis, as if Barnes & Noble.com was 100% owned in the prior year.

GUIDANCE

For the third and fourth quarters, the company expects comparable store sales at Barnes & Noble stores to increase between 1% and 2%. Full year comparable store sales are expected to increase approximately 3%.

For the third quarter, Barnes & Noble.com expects net sales to range between $85 million and $95 million, and GameStop expects comparable store sales to range from 4% to 6%.

Consolidated earnings per share guidance, excluding the debt redemption charge, for the full year is now projected to be $2.34 to $2.42, representing pro-forma growth of 23% to 27% over 2003. Previous full year earnings per share guidance was $2.19 to $2.26. The following tables present earnings per share guidance for the third quarter, fourth quarter and the full year. Earnings per share guidance for GameStop is based on the company’s approximate 63% ownership interest.

 

THIRD QUARTER EPS 2004 Guidance(a) 2003
Low High Pro forma (b)
Barnes & Noble Bookstores  $      0.08  $      0.10  $      0.10
Barnes & Noble.com        (0.09)        (0.08)        (0.11)
   Total Book Operating Segment        (0.01)          0.02        (0.01)
   Total Video Game Operating Segment           0.10          0.11          0.09
   Consolidated  $      0.09  $      0.13  $      0.08
           
FOURTH QUARTER EPS 2004 Guidance(a) 2003
Low High Pro forma (b)
Barnes & Noble Bookstores  $      1.54  $      1.58  $      1.40
Barnes & Noble.com        (0.03)        (0.02)        (0.02)
   Total Book Operating Segment          1.51          1.56          1.38
   Total Video Game Operating Segment           0.36          0.38          0.30
   Consolidated  $      1.87  $      1.94  $      1.68
           
FULL YEAR EPS 2004 Guidance(c) 2003
Low High Pro forma (b)
Barnes & Noble Bookstores (d)  $      2.06  $      2.10  $      1.75
Barnes & Noble.com        (0.28)        (0.26)        (0.34)
   Total Book Operating Segment          1.78          1.84          1.41
   Total Video Game Operating Segment           0.56          0.58          0.50
   Consolidated before debt redemption          2.34          2.42          1.91
   Debt redemption charge (e)        (0.11)        (0.11)             -  
   Consolidated GAAP EPS  $      2.23  $      2.31  $      1.91
           
(a) Based on a weighted average share count of approximately 72 million.
(b) Pro forma as if the company consolidated 100% of Barnes & Noble.com for all periods presented.
(c) Based on a weighted average share count of approximately 75 million.
(d) Includes the impact of $4 million interest addback, prior to the June 28, 2004 redemption of the convertible notes
(e) A one-time charge of $14.6 million associated with the redemption of the convertible notes.

A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 11:00 A.M. ET on Thursday, August 19, 2004, and is accessible at www.barnesandnobleinc.com/financials.  The call will also be archived at www.fulldisclosure.com for one year.

Barnes & Noble, Inc. will report third quarter earnings on or about November 18, 2004.



About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 840 bookstores in 50 states.  For the third year in a row, the company is the nation’s top retail brand for quality, 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 and the number-one brand among e-commerce companies, according to the latest EquiTrend survey.  In addition to its retail operations, Barnes & Noble is one of the largest book publishers in the world.  Its subsidiary, Sterling Publishing, publishes over 1,300 new titles a year and has an active list of over 6,000 titles.

General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate Web site: http://www.barnesandnobleinc.com.

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 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 successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, 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.