Barnes & Noble Education, Inc.

Results of Operations

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our condensed consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks and general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, warehouse costs related to inventory management and order fulfillment, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our selling and administrative expenses consist primarily of store and overhead payroll, including long-term incentive plan compensation. Selling and administrative expenses also include direct expenses to support the stores, merchandising, procurement, and field support, consisting of information technology, professional services and travel.

(a)Adjusted net loss and Adjusted EBITDA are non-GAAP financial measures. See Use of Non-GAAP Measures discussion below.

Results of Operations - 13 weeks ended August 1, 2026 compared with the 13 weeks ended August 2, 2025

(a)Represents the percentage these costs bear to the related sales, instead of total sales.

Overview

First quarter fiscal year 2027 revenue increased by 0.8%, or $2.4 million, to $290.6 million, primarily driven by growth in our BNC First Day® programs, partially offset by the net impact of new and closed stores. Gross Comparable Store Sales increased by $10.7 million, or 3.7%, during the quarter, including a $10.3 million, or 9.0% increase in BNC First Day® program sales. Net loss improved by $5.4 million, or 29.3%, to $(12.9) million, compared with $(18.3) million in the prior-year period. Adjusted EBITDA improved by $2.2 million, or 18.9%, to $(9.3) million from $(11.5) million in the prior-year period, reflecting higher gross profit and lower operating expenses.

Sales

The following table summarizes our sales for the 13 weeks ended August 1, 2026 and August 2, 2025:

Sales increased during the first quarter of fiscal year 2027 compared with the prior-year period, primarily due to higher comparable store sales driven by growth in our BNC First Day® programs and general merchandise sales, partially offset by the net impact of new and closed stores.

The components of the sales variances for the 13 week periods are reflected in the table below.

(a) Logo general merchandise sales are recognized on a net basis as commission revenue in the condensed consolidated financial statements. For Gross Comparable Store Sales details, see below.

(b) Other revenue includes brand partnership marketing, fulfillment operations, liquidation sales, shipping and handling, marketplace sales, certain accounting adjusting items related to return reserves, and other deferred items.

The following is a store count summary for physical stores and virtual stores.

During the 13 weeks ended August 1, 2026, we opened 34 stores and closed 88 stores. Of the 88 store closures, 40 were associated with two multi-campus contracts. Store closures are the result of both lost accounts due to competitive dynamics and proactive decisions to close underperforming stores, including one of the multi-campus contracts referenced above.

Generally, sales are impacted by the net impact of new and closed stores, conversion to BNC First Day® programs, increased campus traffic, and the number and timing of on-campus activities and events, such as graduations, athletic events, alumni events, merchandising and marketing programs, and prospective student campus tours.

Our total sales increased by $2.4 million, or 0.8%, to $290.6 million during the 13 weeks ended August 1, 2026 from $288.2 million during the 13 weeks ended August 2, 2025.

•Product sales and other increased by $2.7 million, or 1.0%, to $276.9 million during the 13 weeks ended August 1, 2026 from $274.2 million during the 13 weeks ended August 2, 2025.

◦Course material product sales increased by $2.2 million, or 1.3%, to $180.4 million during the 13 weeks ended August 1, 2026, compared with $178.2 million in the prior-year period. The increase was related to higher comparable store sales, primarily due to growth in our BNC First Day® programs, partially offset by the net impact of new and closed stores.

◦General merchandise product net sales increased by $1.6 million, or 2.1%, to $76.0 million, compared with $74.4 million in the prior-year period, primarily due to higher supply and graduation product sales, partially offset by lower emblematic product sales. Gross Comparable Store Sales for general merchandise increased by $3.2 million, or 3.0%, compared with the prior-year period, as discussed below.

◦Service and other revenue decreased by $1.1 million, or 5.1%, to $20.4 million, compared with $21.5 million in the prior-year period, primarily due to lower liquidation sales.

•Rental income for course materials decreased by approximately $0.2 million, or 1.8%, to $13.7 million during the 13 weeks ended August 1, 2026, from $14.0 million during the 13 weeks ended August 2, 2025, primarily due to closed stores, the timing of deferred rental revenue and the continued shift to digital products.

Gross Comparable Store Sales

To supplement the Total Sales table presented above, the Company uses Gross Comparable Store Sales as a key performance indicator. Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Gross Comparable Store Sales compared to a net basis as commission revenue in our condensed consolidated financial statements.

We believe the current Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making. Gross Comparable Store Sales are also referred to as “same-store” sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

The increase in Gross Comparable Store Sales for course materials was primarily due to growth in BNC First Day® affordable access programs, partially offset by declines in a la carte courseware sales. The increase in Gross Comparable Store Sales for general merchandise was primarily due to higher supply and graduation product sales.

Gross Comparable Store Sales variances by category for the 13 week periods are as follows:

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 80.4% during the 13 weeks ended August 1, 2026 compared to 80.8% during the 13 weeks ended August 2, 2025. Our gross margin increased by $1.7 million, or 3.0%, to $57.0 million, or 19.6% of sales, during the 13 weeks ended August 1, 2026 from $55.4 million, or 19.2% of sales during the 13 weeks ended August 2, 2025.

The following table summarizes the cost of sales:

The following table summarizes gross margin:

For the 13 weeks ended August 1, 2026, gross margin as a percentage of sales increased primarily due to lower contract costs as a percentage of sales related to our college and university contracts, reflecting the shift to digital and BNC First Day® programs and the non-renewal of lower-profitability contracts, partially offset by lower margin rates related to liquidation sales and rental rates.

Selling and Administrative Expenses

During the 13 weeks ended August 1, 2026, selling and administrative expenses decreased by $(0.5) million, or (0.8)%, to $67.3 million from $67.9 million during the 13 weeks ended August 2, 2025. This decrease was primarily due to lower operating expenses, including lower technology expenses and service charges, partially offset by incremental bad debt expense.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by $1.0 million, to $8.2 million during the 13 weeks ended August 1, 2026 from $9.2 million during the 13 weeks ended August 2, 2025. The decrease was primarily attributable to lower depreciation expense associated with stores closed subsequent to the first quarter of fiscal 2026, partially offset by accelerated depreciation on fixtures and leasehold improvements associated with stores closed or identified for closure during the current period.

Other (income) expense

During the 13 weeks ended August 1, 2026, we recognized other income totaling $1.2 million, comprised primarily of a $1.7 million cash receipt from the release of funds previously held in escrow, offset by $0.5 million of legal and professional fees.

During the 13 weeks ended August 2, 2025, we recognized other expenses totaling $1.5 million, primarily comprised of Investigation related costs.

Operating Income (Loss)

Our operating loss was $17.3 million during the 13 weeks ended August 1, 2026, compared to operating loss of $23.2 million during the 13 weeks ended August 2, 2025. The decrease in operating loss is due to the matters discussed above.

Interest Expense, Net

Net interest expense decreased by $(1.0) million to $2.7 million during the 13 weeks ended August 1, 2026 from $3.7 million during the 13 weeks ended August 2, 2025. Interest expense decreased primarily due to lower borrowings.

Income Tax (Benefit) Expense

We recorded an income tax benefit of $7.1 million on pre-tax loss of $(20.0) million during the 13 weeks ended August 1, 2026, which represented an effective income tax rate of 35.4% and we recorded an income tax expense of $(8.6) million on a pre-tax loss of $(26.9) million during the 13 weeks ended August 2, 2025, which represented an effective income tax rate of 32.1%. The effective tax rate for the 13 weeks is higher than the prior year comparable period due to the IRC 382 limitation on attribute utilization, increased projections of taxable income.

Net Loss

As a result of the factors discussed above, net loss was $(12.9) million during the 13 weeks ended August 1, 2026, compared with net loss of $(18.3) million during the 13 weeks ended August 2, 2025.