Barnes & Noble Reports Fiscal 2018 First Quarter Financial Results

First Quarter Operating Results Improve on Expense Reductions

Barnes & Noble, Inc. BKS today reported sales and earnings for its fiscal 2018 first quarter ended July 29, 2017.

Total sales for the first quarter were $853 million, declining 6.6% as compared to the prior year. Comparable store sales decreased 4.9%, as declines in non-book categories outpaced improved book trends during the quarter. The Company also experienced lower online and NOOK^® sales during the quarter, which were impacted by the prior year eBook settlement and lower promotional activity.

The consolidated first quarter net loss improved to $10.8 million, or $0.15 per share, compared to a loss of $14.4 million, or $0.20 per share, in the prior year.

The consolidated first quarter operating loss of $15.2 million improved $6.2 million versus the prior year. Retail incurred an operating loss of $12.5 million, while NOOK incurred an operating loss of $2.7 million.

Consolidated first quarter EBITDA was $11.2 million, as compared to $9.6 million a year ago. NOOK generated EBITDA of $0.6 million, an $8.6 million improvement over the prior year on expense reductions. Retail EBITDA of $10.6 million decreased $7.0 million primarily due to the comparable store sales decline, somewhat mitigated by expense reductions.

"Our first quarter earnings results improved over the prior year, as we were able to mitigate the sales decline through expense reductions," said Demos Parneros, Chief Executive Officer of Barnes & Noble, Inc. "We expect to improve our performance in the back-half of the year, which coupled with our focus on expense reduction, will enable us to achieve EBITDA of $180 million."

Outlook

For fiscal year 2018, the Company continues to expect comparable bookstore sales to decline in the low single digits and full year consolidated EBITDA to be approximately $180 million.

Conference Call

A conference call with Barnes & Noble, Inc.'s senior management will be webcast beginning at 10:00 A.M. ET on Thursday, September 7, 2017, and is accessible at investors.barnesandnobleinc.com.

Barnes & Noble, Inc. will report fiscal 2018 second quarter results on or about November 30, 2017.

About Barnes & Noble, Inc.

Barnes & Noble, Inc. BKS is the nation's largest retail bookseller, and a leading retailer of content, digital media and educational products. The Company operates 632 Barnes & Noble bookstores in 50 states, and one of the Web's premier e-commerce sites, BN.com (www.bn.com). The Nook Digital business offers a lineup of popular NOOK^® tablets and eReaders and an expansive collection of digital reading and entertainment content through the NOOK Store^®. The NOOK Store features more than 4.5 million digital books in the US (www.nook.com), plus periodicals and comics, and offers the ability to enjoy content across a wide array of popular devices through Free NOOK Reading Apps™ available for Android™, iOS^® and Windows^®.

General information on Barnes & Noble, Inc. can be obtained by visiting the Company's corporate website at www.barnesandnobleinc.com.

BKS – Financial

Forward-Looking Statements

This press release contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) and information relating to Barnes & Noble that are based on the beliefs of the management of Barnes & Noble as well as assumptions made by and information currently available to the management of Barnes & Noble. When used in this communication, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," "will," "forecasts," "projections," and similar expressions, as they relate to Barnes & Noble or the management of Barnes & Noble, identify forward-looking statements.

Such statements reflect the current views of Barnes & Noble with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for Barnes & Noble's products, low growth or declining sales and net income due to various factors, including store closings, higher-than-anticipated or increasing costs, including with respect to store closings, relocation, occupancy (including in connection with lease renewals) and labor costs, the effects of competition, the risk of insufficient access to financing to implement future business initiatives, risks associated with data privacy and information security, risks associated with Barnes & Noble's supply chain, including possible delays and disruptions and increases in shipping rates, various risks associated with the digital business, including the possible loss of customers, declines in digital content sales, risks and costs associated with ongoing efforts to rationalize the digital business, the risk that financial and operational forecasts and projections are not achieved, the performance of Barnes & Noble's initiatives including but not limited to new store concepts and eCommerce initiatives, unanticipated adverse litigation results or effects, potential infringement of Barnes & Noble's intellectual property by third parties or by Barnes & Noble of the intellectual property of third parties, and other factors, including those factors discussed in detail in Item 1A, "Risk Factors," in Barnes & Noble's Annual Report on Form 10-K for the fiscal year ended April 29, 2017, and in Barnes & Noble's other filings made hereafter from time to time with the SEC.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to Barnes & Noble or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. Barnes & Noble undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this communication.


BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

	13 weeks ended			13 weeks ended
	July 29, 2017			July 30, 2016

Sales	$	853,316		$	913,882
Cost of sales and occupancy		599,835			636,343
Gross profit		253,481			277,539
Selling and administrative expenses		242,295			267,891
Depreciation and amortization		26,398			31,037
Operating loss		(15,212	)		(21,389	)
Interest expense, net		2,040			1,629
Loss before taxes		(17,252	)		(23,018	)
Income taxes		(6,474	)		(8,602	)
Net loss	$	(10,778	)	$	(14,416	)

Loss per common share:
Basic	$	(0.15	)	$	(0.20	)
Diluted	$	(0.15	)	$	(0.20	)

Weighted average common shares outstanding:
Basic		72,453			72,903
Diluted		72,453			72,903

Dividends declared per common share	$	0.15		$	0.15

Percentage of sales:
Sales		100.0	%		100.0	%
Cost of sales and occupancy		70.3	%		69.6	%
Gross profit		29.7	%		30.4	%
Selling and administrative expenses		28.4	%		29.3	%
Depreciation and amortization		3.1	%		3.4	%
Operating loss		-1.8	%		-2.3	%
Interest expense, net		0.2	%		0.2	%
Loss before taxes		-2.0	%		-2.5	%
Income taxes		-0.8	%		-0.9	%
Net loss		-1.3	%		-1.6	%


BARNES & NOBLE, INC. AND SUBSIDIARIES
Segment Information
(In thousands)
(Unaudited)


		13 weeks ended			13 weeks ended
		July 29, 2017			July 30, 2016

Sales
	Retail	$	830,036		$	881,713
	NOOK		29,500			41,048
	Elimination		(6,220	)		(8,879	)
Total		$	853,316		$	913,882

Gross Profit
	Retail	$	238,890		$	258,287
	NOOK		14,591			19,252
Total		$	253,481		$	277,539

Selling and Administrative Expenses
	Retail	$	228,321		$	240,692
	NOOK		13,974			27,199
Total		$	242,295		$	267,891

EBITDA
	Retail	$	10,569		$	17,595
	NOOK		617			(7,947	)
Total		$	11,186		$	9,648

Depreciation and Amortization
	Retail	$	(23,079	)	$	(24,962	)
	NOOK		(3,319	)		(6,075	)
Total		$	(26,398	)	$	(31,037	)

Operating Loss
	Retail	$	(12,510	)	$	(7,367	)
	NOOK		(2,702	)		(14,022	)
Total		$	(15,212	)	$	(21,389	)

Net Loss
	Operating loss	$	(15,212	)	$	(21,389	)
	Interest expense, net		(2,040	)		(1,629	)
	Income taxes		6,474			8,602
Total		$	(10,778	)	$	(14,416	)



Percentage of sales:

Gross Margin
	Retail		28.8	%		29.3	%
	NOOK		62.7	%		59.8	%
Total			29.7	%		30.4	%

Selling and Administrative Expenses
	Retail		27.5	%		27.3	%
	NOOK		60.0	%		84.6	%
Total			28.4	%		29.3	%

EBITDA
	Retail		1.3	%		2.0	%
	NOOK		2.7	%		-24.7	%
Total			1.3	%		1.1	%

Depreciation and Amortization
	Retail		-2.8	%		-2.8	%
	NOOK		-14.3	%		-18.9	%
Total			-3.1	%		-3.4	%

Operating Loss
	Retail		-1.5	%		-0.8	%
	NOOK		-11.6	%		-43.6	%
Total			-1.8	%		-2.3	%


BARNES & NOBLE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)

	July 29, 2017			July 30, 2016

ASSETS
Current assets:
Cash and cash equivalents	$	11,978		$	14,279
Receivables, net		64,016			102,289
Merchandise inventories, net		950,658			988,172
Prepaid expenses and other current assets		110,314			118,588
Total current assets		1,136,966			1,223,328

Property and equipment:
Land and land improvements		2,541			2,541
Buildings and leasehold improvements		1,069,981			1,052,576
Fixtures and equipment		1,625,127			1,578,172
		2,697,649			2,633,289
Less accumulated depreciation and amortization		2,427,178			2,343,382
Net property and equipment		270,471			289,907

Goodwill		207,381			211,276
Intangible assets, net		310,010			310,713
Other non-current assets		10,530			12,930
Total assets	$	1,935,358		$	2,048,154

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	511,226		$	579,777
Accrued liabilities		265,400			307,374
Gift card liabilities		337,965			360,679
Total current liabilities		1,114,591			1,247,830

Long-term debt		84,100			64,600
Deferred taxes		83,785			54,290
Other long-term liabilities		97,099			111,341

Shareholders' equity:
Common stock; $0.001 par value; 300,000 shares authorized;
112,092 and 111,416 shares issued, respectively		112			112
Additional paid-in capital		1,744,013			1,740,843
Accumulated other comprehensive income		315			198
Retained earnings		(67,131	)		(50,007	)
Treasury stock, at cost, 39,558 and 38,845 shares, respectively		(1,121,526	)		(1,121,053	)
Total Barnes & Noble, Inc. shareholders' equity		555,783			570,093
Commitments and contingencies		-			-
Total liabilities and shareholders' equity	$	1,935,358		$	2,048,154


BARNES & NOBLE, INC. AND SUBSIDIARIES
Earnings (Loss) Per Share
(In thousands, except per share data)
(Unaudited)


	13 weeks ended			13 weeks ended
	July 29, 2017			July 30, 2016
Numerator for basic loss per share:
Net loss	$	(10,778	)	$	(14,416	)
Less allocation of dividends to participating securities		(11	)		(203	)
Net loss available to common shareholders	$	(10,789	)	$	(14,619	)

Numerator for diluted loss per share:
Net loss available to common shareholders	$	(10,789	)	$	(14,619	)

Denominator for basic and diluted loss per share:
Basic and diluted weighted average common shares		72,453			72,903

Loss per common share:
Basic	$	(0.15	)	$	(0.20	)
Diluted	$	(0.15	)	$	(0.20	)


BARNES & NOBLE, INC. AND SUBSIDIARIES
Non-GAAP Reconciliation & Forward-Looking Statement
(In millions)
(Unaudited)


	Forward-Looking Fiscal 2018


EBITDA	$	180
Depreciation and amortization		(100	)
Operating income	$	80

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