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

08/18/2005

BARNES & NOBLE REPORTS SECOND QUARTER RESULTS

Achieves Sales and Earnings Guidance
Initiates Quarterly Cash Dividend of $0.15 per share

New York, NY (August 18, 2005)—Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for the second quarter ended July 30, 2005.  In addition, the company announced that its Board of Directors has authorized the initiation of a quarterly cash dividend of $0.15 per share for shareholders of record at the close of business on September 9, 2005, payable on September 30, 2005.

Sales for the second quarter were $1,170.8 million, an increase of 6% from $1,100.3 million a year ago.  Sales at Barnes & Noble stores were $1,028.9 million, increasing 7% over the prior year.  Comparable store sales at Barnes & Noble were 4.3% for the quarter, in line with company guidance for a mid-single digit increase.  Sales at Barnes & Noble.com increased 14% over the prior year to $96.3 million.  Sales at B. Dalton stores were $31.6 million, a decrease of (21%) over the prior year, due primarily to store closings offset by a 0.2% comparable store sales increase.

Net earnings for the quarter were $13.5 million, or $0.18 per share, including a previously announced non-cash after-tax charge of $1.1 million, or $0.02 per share, to write off unamortized deferred financing fees resulting from the replacement of the company’s $400 million credit facility with a new $850 million credit facility, and the pre-payment and cancellation of the company’s $245 million term loan.  Excluding this charge, earnings were $0.20 per share in line with guidance of $0.19 to $0.21.

Second quarter net earnings per share increased $0.06 to $0.18 versus $0.12 last year, but were impacted by the following: the write off noted above, the 2004 charge associated with calling the convertible notes, and the 2004 spin-off of GameStop.  Earnings per share from continuing operations, excluding charges, increased 18% to $0.20 from $0.17 last year, as presented in Table A.

Included in second quarter selling and administrative expenses are pretax charges of approximately $6.9 million for legal costs and increased accruals for anticipated settlements of a previously reported class action suit on employee wages and other litigation.  The company believes the resulting accruals will be sufficient to satisfy outcomes of pending litigation.

“We are pleased with our second quarter results,” said Steve Riggio, chief executive officer of Barnes & Noble, Inc.  “The excitement generated by Harry Potter and the Half-Blood Prince boosted our traffic both in stores and online.  Our business is on track as we prepare for the all important second half of the year.

SHARE REPURCHASE ACTIVITY

The company acquired approximately $90 million and $164 million of shares under its share repurchase programs in the second quarter and year-to-date, respectively.

“Our strong commitment to continuing to create shareholder value is evidenced by the declaration of our first ever cash dividend.  This dividend, supported by the company’s excellent free cash flow and strong balance sheet, reflects our confidence in the future growth of Barnes & Noble,” said Leonard Riggio, chairman of Barnes & Noble, Inc. 

GUIDANCE

For the third quarter, the company expects comparable store sales at Barnes & Noble stores to be in the low-single digits.  For the full year, the company continues to expect comparable store sales to increase approximately 3%. 

In the third quarter, the company expects a net loss per share of ($0.01) to ($0.04) based on a basic share count of approximately 68.5 million, as compared to earnings per share from continuing operations of $0.00 in the prior year.  Guidance for the third quarter includes incremental costs of approximately ($0.03) per share associated with the previously announced new distribution center that became operational in August. 

For the full year, the company continues to expect earnings per share to be in a range of $1.94 to $1.98, based on a diluted share count of approximately 73.6 million. 

As of July 30, 2005, the company operated 673 Barnes & Noble stores and 146 B. Dalton stores.  During the second quarter, five Barnes & Noble stores were opened and three were closed.  Four B. Dalton stores were closed during the quarter.

A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 11:00 A.M. ET on Thursday, August 18, 2005, and is accessible at www.barnesandnobleinc.com/webcasts.  The call will also be archived at www.earnings.com for one year.

Barnes & Noble, Inc. will report third quarter earnings on or about November 17, 2005.

FINANCIAL TABLES

Here you can download financial tables related to the sales and earnings for the first quarter ended July 30, 2005.

Consolidated Statements of Operations (13KB)
Consolidated Balance Sheets (14KB)
Second Quarter EPS Reconciliation - Table A (14KB)

To read the tables, you will need Adobe Reader, available at no charge from Adobe. Click here to download Adobe Reader and follow the step-by-step instructions.



About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE:BKS - News), the world's largest bookseller and a Fortune 500 company, operates 819 bookstores in 50 states. For the fourth 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 online bookseller for quality among e-commerce companies, according to the latest EquiTrend survey.

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, the successful and timely completion and integration of the company’s new New Jersey distribution center, 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.