Barnes & Noble Reports Second Quarter Financial Results:

Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today reported sales and earnings for the second quarter ended August 4, 2007. In addition, the company also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share for stockholders of record at the close of business on September 7, 2007, payable on September 28, 2007. Sales for the second quarter increased 7.6% to $1.2 billion. Barnes & Noble store sales increased 7.3% to $1.1 billion, with comparable store sales increasing 4.4% for the quarter. Barnes & Noble.com sales were $97.5 million for the quarter, a 17.9% comparable sales increase compared to the prior year period. Second quarter results were positively impacted by the phenomenal success of J.K. Rowling’s Harry Potter and the Deathly Hallows, of which the company sold 1.7 million copies in its stores and 0.4 million copies online through August 4, 2007. Excluding sales from this book, comparable sales increased 1.0% in stores and 7.3% online. Bestselling titles during the quarter also included The Reagan Diaries, Al Gore’s The Assault on Reason, Conn and Hal Iggulden’s The Dangerous Book for Boys, Walter Isaacson’s Einstein, Khaled Hosseini’s A Thousand Splendid Suns and Janet Evanovich’s Lean Mean Thirteen. Second quarter net earnings were $18.1 million or $0.26 per share. Second quarter results include an $8.0 million or $0.12 per share increase in net earnings resulting primarily from previously unrecognized tax benefits for which the statute of limitations expired in the second quarter. Second quarter results also include a $0.03 per share benefit for lower than forecasted distribution center closing costs. Excluding these items, net earnings were $0.12 per share, in-line with company guidance of $0.08 to $0.12 per share. In the second quarter of 2007, the company acquired 0.5 million shares for $19.5 million under its share repurchase program. The company has acquired an additional 1.2 million shares for $39.8 million during the third quarter to date. "Record breaking sales from J.K. Rowling’s Harry Potter and the Deathly Hallows was the principal driver behind our comparable store sales growth in the quarter,” said Steve Riggio, chief executive officer of Barnes & Noble, Inc. "The book continues to sell well, as do all the previous volumes in the Harry Potter series. The new release schedule for the third quarter includes a few books that should generate significant media attention, including President Clinton’s Giving, Alan Greenspan’s The Age of Turbulence and Eric Clapton’s The Autobiography. Based upon current trends, we remain comfortable with our full year sales forecast.” GUIDANCE For the third quarter, the company expects comparable store sales at Barnes & Noble stores to range from flat to an increase in the low-single digits. The company continues to expect full year comparable store sales to range from flat to slightly positive. Barnes & Noble, Inc.’s third quarter loss per share is expected to be in a range of $0.06 to $0.10. The company is increasing its full-year earnings per share guidance to reflect the previously mentioned second quarter benefits from income taxes ($0.12 per share) and distribution center closing costs ($0.03 per share), as well as a $0.05 per share benefit resulting from a reduced fully diluted share count. The company now expects full-year GAAP earnings per share to be in a range of $1.69 to $1.87, compared to previous guidance of $1.49 to $1.67. As of August 4, 2007, the company operated 698 Barnes & Noble stores and 94 B. Dalton stores. During the second quarter, four Barnes & Noble stores were opened and two were closed. Three B. Dalton stores were closed during the quarter. A conference call with Barnes & Noble, Inc.’s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, August 23, 2007, 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 20, 2007. ABOUT BARNES & NOBLE, INC. Barnes & Noble, Inc. (NYSE: BKS), the world's largest bookseller and a Fortune 500 company, operates 792 bookstores in 50 states. For the fourth year in a row, the company is the nation’s top bookseller brand, as determined by a brand’s overall strength based on its combination of familiarity, quality and purchase intent, 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. 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, the results of the internal review of the company’s stock option practices and the related inquiries by the Securities and Exchange Commission and the U.S. Department of Justice and related stockholder derivative lawsuits, 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. BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data)                       13 weeks ended 26 weeks ended August 4, 2007   July 29, 2006 August 4, 2007   July 29, 2006   Sales $ 1,244,218 1,156,159 2,389,613 2,270,894 Cost of sales and occupancy   882,481   806,637   1,693,845   1,582,622   Gross profit   361,737   349,522   695,768   688,272   Selling and administrative expenses 304,009 278,679 599,217 559,821 Depreciation and amortization 41,430 41,217 86,938 81,772 Pre-opening expenses   2,602   2,705   3,636   5,985   Operating profit 13,696 26,921 5,977 40,694 Interest income (expense), net   1,557   (724 ) 4,695   786   Income before taxes and minority interest 15,253 26,197 10,672 41,480 Income taxes   (1,899 ) 10,675   (3,731 ) 16,903   Income before minority interest 17,152 15,522 14,403 24,577 Minority interest   900   1,054   1,978   1,990   Net income $ 18,052   16,576   16,381   26,567   Income per common share: Basic $ 0.28 0.25 0.25 0.41 Diluted $ 0.26 0.24 0.24 0.38   Weighted average common shares outstanding Basic 65,372 65,070 65,291 65,408 Diluted 68,797 68,895 68,990 69,499     Percentage of sales: Sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales and occupancy   70.9 % 69.8 % 70.9 % 69.7 % Gross profit   29.1 % 30.2 % 29.1 % 30.3 % Selling and administrative expenses 24.4 % 24.1 % 25.1 % 24.7 % Depreciation and amortization 3.3 % 3.6 % 3.6 % 3.6 % Pre-opening expenses   0.2 % 0.2 % 0.2 % 0.3 % Operating profit 1.1 % 2.3 % 0.3 % 1.8 % Interest income (expense), net   0.1 % -0.1 % 0.2 % 0.0 % Income before taxes and minority interest 1.2 % 2.3 % 0.4 % 1.8 % Income taxes   -0.2 % 0.9 % -0.2 % 0.7 % Income before minority interest 1.4 % 1.3 % 0.6 % 1.1 % Minority interest   0.1 % 0.1 % 0.1 % 0.1 % Net income   1.5 % 1.4 % 0.7 % 1.2 % BARNES & NOBLE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands)             August 4, 2007   July 29, 2006   February 3, 2007     ASSETS Current assets: Cash and cash equivalents $ 208,234 21,776 348,767 Receivables, net 124,452 131,371 100,467 Merchandise inventories 1,399,970 1,375,900 1,354,580 Prepaid expenses and other current assets   128,323   85,400   118,626   Total current assets   1,860,979   1,614,447   1,922,440     Property and equipment: Land and land improvements 3,247 3,247 3,247 Buildings and leasehold improvements 1,012,712 973,391 990,058 Fixtures and equipment   1,331,712   1,245,443   1,310,026   2,347,671 2,222,081 2,303,331 Less accumulated depreciation and amortization   1,551,800   1,428,320   1,497,275   Net property and equipment   795,871   793,761   806,056     Goodwill 257,611 261,678 259,683 Intangible assets, net 89,918 92,470 91,176 Deferred taxes 105,006 114,949 104,103 Other noncurrent assets   14,644   25,478   13,340   Total assets $ 3,124,029   2,902,783   3,196,798     LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 835,167 755,500 792,977 Accrued liabilities   572,360   514,701   696,666   Total current liabilities   1,407,527   1,270,201   1,489,643     Long-Term Debt - 41,000 - Deferred taxes 160,273 158,035 160,273 Other long-term liabilities 389,269 387,957 371,357   Minority interest 7,850 7,094 10,660   Shareholders' equity: Common stock; $.001 par value; 300,000 shares authorized; 86,316, 84,335 and 84,608 shares issued, respectively   86 84 85 Additional paid-in capital 1,214,216 1,125,715 1,169,167 Accumulated other comprehensive loss (6,804 ) (8,826 ) (7,086 ) Retained earnings 596,746 519,211 600,404 Treasury stock, at cost, 20,668, 19,520 and 19,520 shares, respectively   (645,134 ) (597,688 ) (597,705 ) Total shareholders' equity   1,159,110   1,038,496   1,164,865   Commitments and contingencies   -   -   -   Total liabilities and shareholders' equity $ 3,124,029   2,902,783   3,196,798