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[LETTER TO OUR SHAREHOLDERS continued ]
4
2005 Annual ReportBarnes & Noble, Inc.
During 2005, we opened 27 Barnes & Noble stores, including a new location in Morgantown, West
Virginia, giving us a presence in all 50 states. We ended the year with 681 stores. On a net basis, we
added 497,000 square feet of space to our store base during the year. We closed 36 B. Dalton stores,
ending the year with 118 stores.
We completed construction of our new 1.1 million-square-foot distribution center in New Jersey.
This new center, which will be fully operational in 2006, has state-of-the-art technology that enables
us to more efficiently and profitably handle fulfillment for our stores and Internet customers. We also
introduced a more advanced data warehouse that allows us to optimize the management of our
supply chain. This system gives us more efficient visibility into our in-stock positions, enabling us to
keep closer control of inventory levels and supports our goal of maximizing sales.
Barnes & Noble.com continued to be a strong contributor to our overall success, achieving year-over-
year sales growth of 5%. Independent market commentary reflects the high quality of our online
capability: Barnes & Noble.com continues to be the No. 1 online bookseller for quality among
e-commerce companies, according to the latest EquiTrend Survey™, conducted by Harris Interactive™.
In the American Consumer Satisfaction Index, a leading industry benchmark of customer satisfaction
compiled by the University of Michigan, Barnes & Noble.com achieved the highest rating among
e-commerce companies. In addition, Barnes & Noble.com continues to receive important recognition
in other Web measurement studies, including high marks for reliability in Keynote Systems, Inc.’s
2005 Service Level Rankings for Online Retailers.
We ended 2005 with the strongest balance sheet in our company’s history, and we utilized our excess
cash in 2005 to fully repay our $245 million term loan. At year-end, we had no outstanding debt and
$373 million of cash.
Consistent with our ongoing commitment to create value for our shareholders, we acquired 7.7
million shares of the company’s stock for $282.7 million and issued two cash dividends of $0.15 per
share, for a total of approximately $20 million.
Looking ahead, we will continue to leverage our multi-channel strategy, enhancing our customers’
experience no matter how they choose to visit us, whether online or in our stores. We plan to open
30 to 40 stores this year, a target that will give us the flexibility to upgrade existing locations while
we also enter new markets.