Barnes & Noble Reports 2005 Results: Bookselling Earnings Per Share Increase 21%; Generates Record Operating Free Cash Flow; Issues 2006 Guidance

Sales for the full year increased 5% to $5.1 billion. Barnes &Noble store sales increased 6% to $4.4 billion, with comparable storesales increasing 2.9% for the year, in line with company guidance fora 2% to 3% increase. B. Dalton sales were $141.6 million for the year,a 20% decrease due to store closings. Comparable store sales at B.Dalton increased 0.9% for the year. Sales at Barnes & Noble.comincreased 5% to $439.7 million.

Net earnings from Bookselling (continuing operations excludingGameStop) increased 19% for the year to $146.7 million. Net earningsfor the year were impacted by a non-cash after-tax charge of $7.5million, or $0.10 per share, related to the impairment of certainstore assets determined to be underperforming. Excluding this charge,net earnings from Bookselling were $154.2 million, a 25% increase overthe prior year.

Full year net earnings per share from Bookselling increased 21% to$2.03, in line with company guidance of $1.99 to $2.03. Excluding theasset impairment charge noted above, Bookselling net earnings pershare were $2.14, a 27% increase over the prior year period.

The full year results included after-tax costs of $6.6 million, or$0.09 per share, associated with the previously announced redundancycosts for the new distribution center. Full year results also includethe previously announced charges of $0.02 for the write-off ofdeferred financing fees resulting from the replacement of thecompany's credit facility and the elimination of the term loan, and$0.06 in legal settlement costs, both of which occurred in the secondquarter.

FOURTH QUARTER

Sales for the fourth quarter increased 5% to $1.8 billion. Barnes& Noble store sales increased 6% to $1.4 billion, with comparablestore sales increasing 3.3% for the quarter, in line with companyguidance for a low single digit increase. B. Dalton sales were $50.1million for the quarter, an 18% decrease due to store closings.Comparable store sales at B. Dalton increased 3.8% for the quarter.Sales at Barnes & Noble.com increased 1% to $152.6 million for theperiod.

Net earnings from Bookselling increased 10% for the quarter to$123.0 million. Net earnings for the quarter were impacted by anon-cash after-tax charge of $7.5 million, or $0.11 per share, relatedto the impairment of certain store assets determined to beunderperforming. Excluding this charge, net earnings from Booksellingwere $130.5 million, a 16% increase over the prior year.

Fourth quarter net earnings per share from Bookselling increased16% to $1.76, in line with company guidance of $1.72 to $1.76.Excluding the asset impairment charge noted above, net earnings pershare were $1.87, a 23% increase over the prior year period.

CASH FLOW

Due to strong operating results, as well as a continued focus onexpense controls and management of working capital, the companygenerated record operating free cash flow of $362 million for theyear. Operating free cash flow is defined as EBITDA (earnings beforeinterest, taxes, depreciation and amortization) minus capitalexpenditures minus interest and taxes paid plus/minus any changes inworking capital.

In 2005, the company utilized its operating cash flow to fullyprepay its $245 million term loan, acquire 7.7 million shares for$282.7 million pursuant to its share repurchase programs and for thepayment of two cash dividends totaling $20 million, paid at $0.15 pershare. The company had $373 million of cash remaining at year-end andno borrowings under its Revolving Credit Facility.

In the first quarter of 2006, the company has acquired 1.6 millionshares for $68.2 million under its share repurchase program.

"By every single important financial metric, 2005 was a great yearfor the company. Strong expense controls and expanding gross marginsdrove record earnings," said Steve Riggio, chief executive officer."Our comparable stores sales grew 2.9% for the year without anyadvertising expenditures or additional coupon promotions. Tightmanagement of inventories helped produce record operating cash flows,which we used to increase shareholder value by repurchasing shares andby initiating a quarterly dividend to stockholders."

2006 GUIDANCE

For the first quarter and for the full year the company expectscomparable store sales at Barnes & Noble stores to increase in the lowsingle digits.

Barnes & Noble, Inc.'s first quarter earnings per share areexpected to be in a range of $0.10 to $0.14. Full year earnings pershare are expected to be in a range of $2.20 to $2.30, which includesexpenses of $0.09 per share related to the conversion and transitionplan for the company's new distribution center. The company expects tocomplete the conversion and incur all associated costs by the end of2006.

The fully diluted weighted average share count used in thecomputation of earnings per share for the first quarter and full yearis 70.3 and 71.0 million, respectively.

The company will adopt Statement of Financial Accounting StandardsNo. 123(R) (As Amended), "Share-Based Payment," and begin expensingstock options as of the beginning of fiscal year 2006. As a result,the company's guidance includes charges of approximately $0.04 pershare in the first quarter and $0.15 per share for the full year forall stock compensation expenses. The following table presents 2006 and2005 adjusted earnings per share with and without stock compensationexpenses for stock options and restricted stock:
First Quarter Full Year
------------------------ ------------------------
2006 2005 2006 2005
-------------- --------- -------------- ---------
GAAP EPS:
Guidance $0.10 - $0.14 $2.20 - $2.30
Actual as reported $0.13 $2.03

Impact of stock
compensation expense 0.04 0.00 0.15 0.03
-------------- --------- -------------- ---------

Adjusted EPS $0.14 - $0.18 $0.13 $2.35 - $2.45 $2.06
============== ========= ============== =========

Excluding the impact of expenses associated with stockcompensation (adjusted EPS above), the company has forecasted 2006earnings per share to increase between 14% and 19%.

As of January 28, 2006, the company operated 681 Barnes & Noblestores and 118 B. Dalton stores. During the fourth quarter, two Barnes& Noble stores were opened and four were closed. 23 B. Dalton storeswere closed during the quarter.

A conference call with Barnes & Noble, Inc.'s senior managementwill be webcast beginning at 11:00 A.M. ET on Thursday, March 16,2006, and is accessible at www.barnesandnobleinc.com/webcasts. Thecall will also be archived at www.earnings.com for one year.

Barnes & Noble, Inc. will report first quarter earnings on orabout May 18, 2006.

ABOUT BARNES & NOBLE, INC.

Barnes & Noble, Inc. (NYSE: BKS), the world's largest booksellerand a Fortune 500 company, operates 799 bookstores in 50 states. Forthe fourth year in a row, the company is the nation's top retail brandfor quality, according to the EquiTrend(R) Brand Study by HarrisInteractive(R). Barnes & Noble conducts its online business throughBarnes & Noble.com (www.bn.com), one of the Web's largest e-commercesites and the number one online bookseller for quality amonge-commerce companies, according to the latest EquiTrend survey.

General information on Barnes & Noble, Inc. can be obtained viathe 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 availingitself of the protections of the safe harbor provided by the PrivateSecurities Litigation Reform Act of 1995 with respect to all suchforward-looking statements. These forward-looking statements are basedon currently available information and represent the beliefs of themanagement of the company. These statements are subject to risks anduncertainties that could cause actual results to differ materially.These risks include, but are not limited to, general economic andmarket conditions, decreased consumer demand for the company'sproducts, possible disruptions in the company's computer or telephonesystems, possible work stoppages or increases in labor costs, possibleincreases in shipping rates or interruptions in shipping service,effects of competition, possible disruptions or delays in the openingof new stores or the inability to obtain suitable sites for newstores, higher than anticipated store closing or relocation costs,higher interest rates, the performance of the company's online andother initiatives, the successful integration of acquired businesses,the successful and timely completion and integration of the company'snew New Jersey distribution center, unanticipated increases inmerchandise or occupancy costs, unanticipated adverse litigationresults or effects, product shortages, and other factors which may beoutside of the company's control. Please refer to the company'sannual, quarterly and periodic reports on file with the SEC for a moredetailed discussion of these and other risks that could cause resultsto differ materially.
BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)


----------------------------------------------------------------------
13 weeks ended 52 weeks ended
--------------------- ---------------------
January January January January
28, 2006 29, 2005 28, 2006 29, 2005
---------- ---------- ---------- ----------

Sales $1,753,249 1,672,772 5,103,004 4,873,595
Cost of sales and
occupancy 1,175,422 1,126,963 3,533,009 3,386,619
---------- ---------- ---------- ----------
Gross profit 577,827 545,809 1,569,995 1,486,976
---------- ---------- ---------- ----------
Selling and administrative
expenses 319,025 295,630 1,134,276 1,052,345
Depreciation and
amortization 42,556 44,601 172,957 181,553
Pre-opening expenses 1,668 1,868 10,938 8,862
---------- ---------- ---------- ----------
Operating profit 214,578 203,710 251,824 244,216
Interest expense, net 496 (670) (1,415) (11,028)
Debt redemption charge - - - (14,582)
---------- ---------- ---------- ----------
Income before taxes and
minority interest 215,074 203,040 250,409 218,606
Income taxes 87,643 87,667 102,042 94,001
---------- ---------- ---------- ----------
Income before minority
interest 127,431 115,373 148,367 124,605
Minority interest (4,450) (3,076) (1,686) (1,230)
---------- ---------- ---------- ----------
Income from continuing
operations 122,981 112,297 146,681 123,375
Income from discontinued
operations (net of income
tax) - 3,331 - 20,001
---------- ---------- ---------- ----------
Net income $ 122,981 115,628 146,681 143,376
========== ========== ========== ==========

Basic income per common
share:
Income from continuing
operations $ 1.88 1.60 2.17 1.79
Income from
discontinued
operations - 0.05 - 0.29
---------- ---------- ---------- ----------
Net income $ 1.88 1.65 2.17 2.08
========== ========== ========== ==========

Diluted income per common
share:
Income from continuing
operations $ 1.76 1.52 2.03 1.68
Income from
discontinued
operations - 0.04 - 0.25
---------- ---------- ---------- ----------
Net income $ 1.76 1.56 2.03 1.93
========== ========== ========== ==========


Weighted average common
shares outstanding
Basic 65,374 69,894 67,560 69,018
Diluted 69,855 73,960 72,150 75,696


Percentage of sales:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and
occupancy 67.0% 67.4% 69.2% 69.5%
---------- ---------- ---------- ----------
Gross profit 33.0% 32.6% 30.8% 30.5%
---------- ---------- ---------- ----------
Selling and administrative
expenses 18.2% 17.7% 22.2% 21.6%
Depreciation and
amortization 2.4% 2.7% 3.4% 3.7%
Pre-opening expenses 0.1% 0.1% 0.2% 0.2%
---------- ---------- ---------- ----------
Operating profit 12.2% 12.2% 4.9% 5.0%
Interest expense, net 0.0% 0.0% 0.0% -0.2%
Debt redemption charge 0.0% 0.0% 0.0% -0.3%
---------- ---------- ---------- ----------
Income before taxes and
minority interest 12.3% 12.1% 4.9% 4.5%
Income taxes 5.0% 5.2% 2.0% 1.9%
---------- ---------- ---------- ----------
Income before minority
interest 7.3% 6.9% 2.9% 2.6%
Minority interest -0.3% -0.2% 0.0% 0.0%
---------- ---------- ---------- ----------
Income from continuing
operations 7.0% 6.7% 2.9% 2.5%
========== ========== ========== ==========



BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)

----------------------------------------------------------------------
January 28, January 29,
2006 2005
----------- -----------


ASSETS
Current assets:
Cash and cash equivalents $ 372,586 535,652
Receivables, net 99,117 91,501
Merchandise inventories 1,313,997 1,274,578
Prepaid expenses and other current assets 86,258 85,140
----------- -----------
Total current assets 1,871,958 1,986,871
----------- -----------

Property and equipment:
Land and land improvements 3,247 3,247
Buildings and leasehold improvements 984,535 940,616
Fixtures and equipment 1,174,973 1,081,966
----------- -----------
2,162,755 2,025,829
Less accumulated depreciation and
amortization 1,356,379 1,221,169
----------- -----------
Net property and equipment 806,376 804,660
----------- -----------

Goodwill 263,731 268,379
Intangible assets, net 93,834 97,538
Deferred taxes 119,334 123,231
Other noncurrent assets 25,969 37,710
----------- -----------
Total assets $ 3,181,202 3,318,389
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 828,852 745,073
Accrued liabilities 700,886 580,509
----------- -----------
Total current liabilities 1,529,738 1,325,582
----------- -----------

Long-term debt - 245,000
Deferred income taxes 158,035 193,743
Other long-term liabilities 367,531 379,180

Minority interest 10,057 8,942

Shareholders' equity:
Common stock; $.001 par value; 300,000
shares authorized; 83,370 and 79,276
shares issued, respectively 83 79
Additional paid-in capital 1,091,018 985,609
Accumulated other comprehensive loss (9,085) (9,857)
Retained earnings 512,594 386,134
Treasury stock, at cost, 16,690 and 9,008
shares, respectively (478,769) (196,023)
----------- -----------
Total shareholders' equity 1,115,841 1,165,942
----------- -----------
Commitments and contingencies - -
----------- -----------
Total liabilities and shareholders' equity $ 3,181,202 3,318,389
=========== ===========