Barnes&Noble 2nd Qtr 2008 Earnings Easily Beats The Street

Barnes & Noble Reports Second Quarter Financial Results
Declares Quarterly Dividend

New York, NY (August 21, 2008)—Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for the second quarter ended August 2, 2008. 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 September 9, 2008, payable on September 30, 2008.
Sales for the second quarter decreased 1.6% to $1.2 billion largely due to last year’s record sales of J.K. Rowling’s Harry Potter and the Deathly Hallows. Barnes & Noble store sales decreased 1.6% to $1.1 billion, with comparable store sales decreasing 4.7% for the quarter. Barnes & Noble.com sales were $99.8 million for the quarter, a 3.6% comparable sales increase. Excluding prior year sales of the Harry Potter book, comparable sales decreased 1.5% in stores and increased 13.9% online.

Bestselling titles during the quarter included Stephenie Meyer’s Breaking Dawn, Randy Pausch’s The Last Lecture, Lauren Weisberger’s Chasing Harry Winston and David Wroblewski’s The Story of Edgar Sawtelle.

Second quarter net earnings were $15.4 million or $0.27 per share. Included in second quarter net earnings was an after tax benefit of $0.12 per share, resulting from a more favorable physical inventory shortage rate than previously estimated and accrued. Excluding this benefit, second quarter net earnings were $0.15 per share (consensus was $0.09), higher than guidance of $0.08 to $0.13 per share.
Despite the softer sales environment, the company’s management of operating expenses and higher than forecasted gross margins enabled it to exceed its second quarter earnings per share guidance. Gross margin was stronger than expected due to greater utilization of the company’s distribution centers and a lower markdown rate.

GUIDANCE
For the third quarter, the company expects comparable store sales at Barnes & Noble stores to decline in the low single digits. Barnes & Noble, Inc.’s third quarter loss per share is expected to be in a range of $0.10 to $0.15.
Based on first-half 2008 sales performance and current trends, the company is reducing its full-year comparable store sales guidance from slightly negative to a decrease in the low single digits. Although the company is reducing full-year sales guidance, the company is reiterating full-year earnings per share guidance to be in a range of $1.70 to $1.90. The company continues to expect full-year results in-line with previously issued guidance despite the challenging retail sales climate as a result of the margin benefits already realized and its continuing focus on controlling expenses and improving gross margins.
As of August 2, 2008, the company operated 723 Barnes & Noble stores and 73 B. Dalton stores. During the second quarter, 10 Barnes & Noble stores were opened and four were closed. 10 B. Dalton stores were closed during the quarter.